SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTIONS 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended January 31, 1998

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the transition period from __________ to __________

Commission File No. 1-12302

Barnes & Noble, Inc.
- ------------------------------------------------------------------------------
(Exact name of registrant as specified in its Charter)

Delaware 06-1196501
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

122 Fifth Avenue, New York, NY 10011
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: (212) 633-3300

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, $0.001 par value per share New York Stock Exchange
(Title of Class) (Name of Exchange on
which registered)

Securities registered pursuant to Section 12(b) of the Act: None

Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405

of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [ ]

The aggregate market value of the voting stock held by non-affiliates of the
registrant was approximately $2,046,874,964 based upon the closing market
price of $38.88 per share of Common Stock on the New York Stock Exchange as of
March 30, 1998.

Number of shares of $.001 par value Common Stock outstanding as of March 30,
1998: 68,185,433

(Cover page 1 of 2)

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant's Proxy Statement for the 1998 Annual Meeting of
Shareholders are incorporated by reference into Part III.

Portions of the Registrant's Annual Report to Shareholders for the fiscal year
ended January 31, 1998 are incorporated by reference into Parts II and IV.

(Cover page 2 of 2)

TABLE OF CONTENTS

Page

PART I

Item 1. Business............................................................. 4

Item 2. Properties........................................................... 16

Item 3. Legal Proceedings.................................................... 16

Item 4. Submission of Matters to a Vote of Security Holders.................. 17

PART II

Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
17

Item 6. Selected Financial Data.............................................. 18

Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations........................................... 18

Item 8. Financial Statements and Supplementary Data.......................... 18

Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure............................................ 18

PART III

Item 10. Directors and Executive Officers of the Registrant................... 18

Item 11. Executive Compensation............................................... 19

Item 12. Security Ownership of Certain Beneficial Owners and Management.......
19

Item 13. Certain Relationships and Related Transactions....................... 19

PART IV

Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K...... 19

PART I

ITEM 1. BUSINESS

General

Barnes & Noble, Inc. ("Barnes & Noble" or the "Company"), the world's
largest bookseller*, operated 483 "super" stores in 48 states and the District
of Columbia and 528 mall-based bookstores in 45 states and the District of
Columbia as of January 31, 1998. The Company's rapidly expanding "super" store
business operates under the Barnes & Noble Booksellers, Bookstop and Bookstar
trade names (collectively "Barnes & Noble stores") and its mall-based business
operates under the B. Dalton Bookseller, Doubleday Book Shops and Scribner's
Bookstore trade names (collectively "B. Dalton stores"). The Company is the
world's largest supplier of books through direct-mail catalogs* and publishes
books under its own Barnes & Noble Books imprint for exclusive sale through its
retail bookstores and mail-order catalogs. The Company is also the exclusive
bookseller in America Online's Marketplace (AOL keyword: BarnesandNoble) and
maintains its own Web site (BarnesandNoble.com), operating the "world's largest
bookseller online." Barnes & Noble is the only book retailer operating through
all four channels of distribution: retail stores, the Internet, 1-800-THE-BOOK
and mail order. During fiscal 1997, the Company's share of the consumer book
market increased to approximately 14%.

The Company's principal business is the retail sale of trade books
(generally hardcover and paperback consumer titles, excluding educational
textbooks and specialized religious titles), mass market paperbacks (such as
mystery, romance, science fiction and other popular fiction), children's
books, off-price bargain books and magazines. These collectively account for
substantially all of the Company's sales. Bestsellers represent only 3% of the
Barnes & Noble store sales.

The Company's fiscal year is comprised of 52 or 53 weeks, ending on
the Saturday closest to the last day of January. The fiscal year ended January
31, 1998 ("fiscal 1997") was comprised of 52 weeks and the fiscal year ended
February 1, 1997 ("fiscal 1996") was comprised of 53 weeks.

The Company generated revenues of $2.797 billion during fiscal 1997,
an increase of 14.2%, compared with revenues of $2.448 billion during fiscal
1996. Fiscal 1996 includes 53 weeks; excluding the impact of the 53rd week,
revenues increased 16%. During fiscal 1997, revenues from Barnes & Noble stores
rose 20.7% to $2.246 billion from $1.861 billion during fiscal 1996. The
Company's net earnings before an extraordinary charge due to early
extinguishment of debt, increased $13.4 million, or 26.2%, to $64.7 million
during fiscal 1997 from $51.2 million during fiscal 1996. The extraordinary
charge of $11.5 million recorded in fiscal 1997 equated to $0.17 per common
dilutive share resulting in net earnings of $53.2 million or $0.76 per common
dilutive share compared with $0.75 per common dilutive share for the prior year.

Barnes & Noble Stores

General

The Company is the largest operator of book "super" stores in the
United States* with 483 stores, of which 65 were opened in fiscal 1997. During
fiscal 1997, Barnes & Noble stores generated 80.3% of

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* Based upon sales reported in trade publications and public filings.

total Company revenues, up from 76.0% during the prior year. The Barnes &
Noble stores realized a comparable store sales increase of 9.4% during fiscal
1997.

Barnes & Noble stores range in size from 10,000 to 60,000 square feet
depending upon market size. The 65 Barnes & Noble stores opened during fiscal
1997 added 1.6 million square feet to the Barnes & Noble store base, bringing
the total square footage to 10.8 million square feet, a 16% increase over the
prior year. The Company intends to open approximately 60 Barnes & Noble stores
during the 52 weeks ending January 30, 1999 which are expected to average
26,000 square feet in size. With its market leadership position and its high
standards for site selection, store design, merchandising and customer service,
the Company believes that its Barnes & Noble store business continues to have
significant growth opportunities and intends to expand its operations in new and
existing markets. The Company plans to continue opening as many new stores in
the future that meet its strict standard for return on investment. The Company
believes that the key elements contributing to the success of the Barnes & Noble
stores are:

Proximity to Customers. The Company's strategy is to increase its
share of the consumer book market, as well as to increase the size of the
market. Since it began its "super" store roll-out, the Company has employed a
market clustering strategy. As of January 31, 1998, Barnes & Noble had stores
in 140 of the total 208 DMA markets (Designated Market Area). In 71 of the 140
markets the Company has only one Barnes & Noble store. The Company believes its
early market penetration and the stores' proximity to their customers strengthen
its market position and increase its franchise value. Most Barnes & Noble stores
are located in high-traffic areas with convenient access to major commercial
thoroughfares and ample parking. Most stores offer extended shopping hours,
generally 9:00 a.m. to 11:00 p.m., seven days a week.

Dominant Title Selection. Each Barnes & Noble store features an
authoritative selection of books, ranging between 60,000 and 175,000 titles.
Each store's comprehensive title selection is customized to the local
community's interests and demands. To further the breadth of title selection,
Barnes & Noble funds the Discover Great New Writers program supporting the
work of newly published authors, and emphasizes books published by small and

independent publishers and university presses. In addition to this extensive
on-site selection, each store will special order any book from the more than
one million books in print. The Company believes that its tremendous selection,
including many otherwise hard-to-find titles, builds customer loyalty.

Experienced Booksellers. Seven years into its "super" store roll-out,
the Company has a large and experienced base of booksellers from which it can
select managers and booksellers to fill positions in the Company's expanding
business. The Company's culture of outgoing, helpful and knowledgeable
booksellers consists of 27,200 full- and part-time employees operating over
1,000 stores as of January 31, 1998. During fiscal 1997, 75% of the new Barnes
& Noble store managers were promoted from within this group, from which the
Company realizes the benefits of better store-level execution, staffing and
customer service.

Store Design and Ambiance. Barnes & Noble stores are designed to be
reminiscent of an old world library, with wood fixtures, antique style chairs
and tables, ample public space, a cafe and public restrooms. Barnes & Noble's
literary cafes, for which the Starbucks Coffee Company is the sole provider of
coffee products, further the image of its "super" stores as a community
meeting place.

Music Departments. As of January 31, 1998, the Company had 155 Barnes
& Noble stores with music departments which range in size from 2,000 to 4,000
square feet. The music departments generally stock over 50,000 titles in
classical music, opera, jazz, blues and pop rock, tailored to the tastes of
the Company's core customers - the 35- to 45-year age group. Listening
stations are available for customers to preview selected compact disks.

Discount Pricing. Barnes & Noble stores employ a nationwide discount
pricing strategy. The New York Times hardcover bestsellers are discounted 30%
off the publishers' suggested retail price, with a 10% discount on most other
hardcover books. The Company believes that its pricing strategies enable the
Company to be highly competitive.

Marketing and Community Relations. Barnes & Noble stores are launched
with a major grand opening campaign involving extensive print and radio
advertising, direct-mail marketing and community events. Each store plans its
own community-based calendar of events, including author appearances,
children's storytelling hours, poetry readings and discussion groups. The
Company believes its community focus encourages customer loyalty, significant
word-of-mouth publicity and free media coverage. The Company also supports
communities through efforts on behalf of First Book, a national organization
dedicated to providing books to children with little or no access to them
outside of school. The Company is one of the leading sponsors of Writer's
Harvest, an annual series of readings held across the country sponsored by
Share our Strength, one of the nation's foremost anti-poverty organization.

Proprietary Product. The Company features titles published under the

Barnes & Noble Books imprint in its retail stores and mail-order catalogs.
During fiscal 1997, sales of Barnes & Noble's self-published titles grew over
30% in terms of retail dollars over fiscal 1996. During 1997 the Company
introduced more titles under its own imprint, bringing its total catalog of
self-published books to over 1,500 titles. Sales of these books enable the
Company to distinguish its product offerings from those of its competitors and
offer customers high quality books at excellent values while generating
attractive gross margins.

Merchandising and Marketing

The Company's merchandising strategy for its Barnes & Noble stores is
to be the authoritative community bookstore which carries a dominant selection
of titles in all subjects, including an extensive selection of titles from
small independent publishers and university presses. Each Barnes & Noble store
stocks from 60,000 to 175,000 titles, of which approximately 50,000 titles are
common to all stores; the balance is crafted to reflect the lifestyles and
interests of each store's customers. Before a store opens, the Company's
buyers study the community and customize the title selection with offerings
from the store's local publishers and authors. After the store opens, each
Barnes & Noble store manager is responsible for adjusting the buyers'
selection to the interests, lifestyles and demands of the store's local
customers. The Company's proprietary database, which includes catalogued sales
rankings of over 650,000 titles in over 110 subjects, provides each store with
comprehensive title selections in those subjects in which it seeks to expand.
During 1997, the Company began rolling out the next generation of its
state-of-the-art store system. The new store system greatly enhances
store-level customer service and productivity with its extremely fast register
transactions and its title database with more than one million titles designed
specifically for book browsing. The roll-out will be substantially completed
in 1998.

Store Locations and Properties

The Company's experienced real estate personnel select sites for new
Barnes & Noble stores after an extensive review of demographic data and other
information relating to market potential, bookstore visibility and access,
available parking, surrounding businesses, compatible nearby tenants,
competition and the location of other Barnes & Noble stores. Most stores are
located in high-visibility areas adjacent to main traffic corridors in strip
shopping centers or freestanding buildings. The Company has been successful in
converting existing structures into dynamic bookstores in the Barnes & Noble
store format such as conversions of old movie theaters, bowling alleys and
landmark buildings.

The number of Barnes & Noble stores located in each state and the
District of Columbia as of January 31, 1998 are listed below:

NUMBER NUMBER

STATE OF STORES STATE OF STORES
- ----- --------- ----- ---------

Alaska 1 Montana 3
Alabama 5 Nebraska 3
Arizona 11 Nevada 5
Arkansas 2 New Hampshire 3
California 70 New Jersey 15
Colorado 13 New Mexico 2
Connecticut 10 New York 31
Dist. Of Columbia 1 North Carolina 13
Florida 35 North Dakota 2
Georgia 10 Ohio 14
Hawaii 1 Oklahoma 5
Idaho 3 Oregon 8
Illinois 20 Pennsylvania 14
Indiana 6 Rhode Island 1
Iowa 2 South Carolina 5
Kansas 4 South Dakota 1
Kentucky 3 Tennessee 8
Louisiana 5 Texas 52
Maine 1 Utah 7
Maryland 6 Vermont 1
Massachusetts 14 Virginia 11
Michigan 13 Washington 13
Minnesota 14 Wisconsin 6
Mississippi 1 Wyoming 1
Missouri 8

Expansion

The Company believes its Barnes & Noble store format offers the
greatest opportunity to increase its share of the expanding consumer book
market and intends to strengthen its position as the world's leading operator
of book superstores by opening approximately 60 new stores during fiscal 1998.

All stores will be opened under the Barnes & Noble Booksellers trade
name, and positions in those stores will be filled from within the Company
wherever possible.

The Company anticipates that its expansion plans will be supported by
a combination of continuing strong demand for consumer books, which has grown
over the past five years at a rate of 5.0% compounded annually according to
Veronis, Suhler & Associates Communications Industry Forecast ("Veronis
Suhler") and incremental sales generated by new stores.

Demographic trends in the United States support the prospect of

continued growth in the retail book industry. The principal book buying
population is between 45 and 64 years of age. According to the U.S. Bureau of
the Census, over the next five years this age group is expected to increase
17%.

B. Dalton Stores

General

The Company is the second largest operator of mall bookstores in the
United States*. During fiscal 1997, B. Dalton generated revenues of
approximately $509.4 million, or 18.2% of the Company's total revenues,
compared with 23.1% of total Company revenues during fiscal 1996.

Most B. Dalton stores range in size from 2,800 to 6,000 square feet.
These stores stock between 15,000 and 25,000 titles, feature new releases,
bestsellers and children's books, and carry a solid selection of titles in
categories such as business, computers, cooking and reference. B. Dalton
employs a market-by-market discount pricing strategy which generally discounts
hardcover bestsellers from 15% to 25% off the publishers' suggested retail
prices. B. Dalton also offers a Book$avers discount card for an annual fee
which allows customers an additional 10% discount on substantially all
purchases. The Company's 18 Doubleday and nine Scribner's bookstores utilize a
more upscale format in select shopping malls and place a greater emphasis on
hardcover and gift books.

The Company is continuing to execute a strategy to maximize returns
from its B. Dalton stores in response to declining sales attributable
primarily to superstore competition and, to a lesser extent, weaker overall
consumer traffic in shopping malls. Part of the Company's strategy has been to
close underperforming stores, which has resulted in the closing of more than
50 B. Dalton stores per year since 1989 as leases come up for renewal.

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* Based upon sales reported in trade publications and public filings.

The Company has also been expanding the size of some of its new B.
Dalton stores and is seeking better locations within malls. A new B. Dalton
prototype was developed for this purpose; more than 100 new or converted stores
have been opened in the new format and are performing, on average, better than
the remaining store base.

Merchandising and Marketing

Each B. Dalton store carries a solid selection of core titles
within a variety of subject categories which are supplemented by new releases,
bestsellers and other titles specially selected to meet local demand. B.

Dalton's merchandise strategy is to expand title assortments within categories
it believes have significant growth potential, such as children's books, mass
market paperbacks (such as mystery, romance, science fiction and other popular
fiction), publishers' remainders and other bargain books including the
Company's self-published books. B. Dalton's product offerings are merchandised
to attract shoppers responding to movies, television talk show topics and
current events. Each store has the ability to customize its selection to its
local customers based upon their interests and demands.

B. Dalton's advertising and promotional programs focus on
point-of-sale and storefront signage and other in-store promotions designed to
attract walk-by mall traffic. B. Dalton takes full advantage of cooperative
advertising funds made available by publishers and generally limits its
expenditures and promotional programs to the amount of such funds. In
addition, stores customarily incur advertising costs, often in amounts equal
to a percentage of their annual sales, for lease required advertising of
mall-related promotional events.

Store Locations and Properties

Approximately 90% of B. Dalton stores are located in enclosed
regional shopping malls. The remaining stores are located in strip shopping
centers and central business districts. Site selections and lease renewals for
all B. Dalton stores are made after an extensive review of demographic data,
mall tenants, location within the mall and competitive factors.

The number of B. Dalton stores located in each state and the District
of Columbia as of January 31, 1998 are listed below:

NUMBER NUMBER
STATE OF STORES STATE OF STORES
- ----- --------- ----- ---------
Alabama 1 Montana 4
Arizona 12 Nebraska 3
Arkansas 1 Nevada 3
California 78 New Hampshire 2
Colorado 11 New Jersey 13
Connecticut 6 New Mexico 2
Dist. Of Columbia 4 New York 22
Florida 27 North Carolina 12
Georgia 13 North Dakota 4
Idaho 3 Ohio 24

Illinois 21 Oklahoma 4
Indiana 8 Oregon 6
Iowa 11 Pennsylvania 24
Kansas 7 South Carolina 7
Kentucky 3 South Dakota 2

Louisiana 12 Tennessee 5
Maine 2 Texas 36
Maryland 12 Utah 6
Massachusetts 8 Virginia 15
Michigan 25 Washington 16
Minnesota 23 West Virginia 1
Mississippi 1 Wisconsin 10
Missouri 16 Wyoming 2

The Company remains committed to opening stores in new shopping mall
projects which meet the Company's return on investment criteria and
anticipates opening four new B. Dalton stores during the 52 weeks ending
January 30, 1999. Given the declining rate of new mall development and the
Company's continuing plans to close B. Dalton stores, the Company anticipates
it will continue to realize a decline in the number of B. Dalton stores during
1998 primarily due to lease expirations. During fiscal 1997, the Company opened
4 B. Dalton stores and closed 53 stores, primarily as a result of electing not
to renew expiring leases.

BarnesandNoble.com

General

During March of 1997, the Company, through its wholly owned
subsidiary BarnesandNoble.com Inc., became the exclusive bookseller in America
Online's marketplace (keyword: BarnesandNoble), linking the world's largest
bookseller with the world's most popular Internet online service. America
Online provides its over 12 million members with access to the proprietary
database of BarnesandNoble.com, and enables the Company to directly reach a
well-established online community. The exclusive four-year agreement gives
BarnesandNoble.com an extensive presence throughout America Online. In May of
1997, BarnesandNoble.com launched its own Web site. The Company believes that
it brings significant competitive advantages to the online bookselling market,
including its distribution expertise, proprietary title database, large
customer base and established brand recognition. BarnesandNoble.com employs a
discount pricing strategy of 30% to 40% off publishers' suggested retail prices
for hardcover and 20% off publishers' suggested retail prices for paperback.

The Company's database of every book in print is powered by a
proprietary search engine that allows users to locate books by author, title or
subject. To further tailor customers' searches, BarnesandNoble.com includes book
descriptions, reviews and author interviews on hundreds of thousands of titles,
along with recommendations by the Company's editors and the Company's online
community of readers. From the latest bestsellers and new releases to diverse
titles from small presses and university publishers, the Company has more books
available for same-day shipping from the Company's distribution center than any
online bookseller. Currently, the Company offers almost 600,000 titles for
same-day shipping covering almost 90% of orders placed through
BarnesandNoble.com. In 1997, over 250,000 customers in 149 countries purchased
their books from BarnesandNoble.com.

Merchandising and Marketing

Since the launch of BarnesandNoble.com, the Company has aggressively
pursued and won marketing and distribution deals with the Web's leading
content, search and commerce sites. These deals serve to extend the reach of
BarnesandNoble.com by creating links to high traffic sites, such as Lycos, CNN
Interactive, Discovery Channel Online, ZD Net, The New York Times, Time Inc.,
New Media and USA Today. The reach was further extended by the thousands of
additional Web sites that have joined the Company's innovative affiliate
network. All of the affiliates earn commissions based upon sales generated
from the traffic they direct to BarnesandNoble.com. The Company also entered
into a partnership with Disney Online, in which BarnesandNoble.com is the
exclusive bookseller for their site and operates a Disney bookstore on the
BarnesandNoble.com site. BarnesandNoble.com has a dedicated management team of
e-commerce marketing and technology professionals. As a leader in the
fast-growing world of e-commerce, the Company intends to actively advertise
and further develop affiliate relationships.

Other Strategies

Proprietary Publishing. With publishing and distribution rights to
over 1,500 titles covering a wide range of subject categories, the Company
further differentiates its product offerings from those of its competitors by
publishing books under its own Barnes & Noble Books imprint for exclusive sale
in its retail stores, direct mail catalogs and BarnesandNoble.com. As part of
this activity, the Company licenses titles directly from domestic and
international publishers as well as from literary agents, commissions books
directly from authors, reprints classic titles in the public domain and
creates collections of fiction and non-fiction using in-house editors. These
books are published under the Barnes & Noble Books imprint. By self-publishing
books, the Company is able to significantly lower its merchandise costs and
pass on a portion of the savings to its customers. While the prices of these
books represent significant value to customers, they also generate
substantially higher gross profit margins than those realized on sales of
non-proprietary books.

Books published by the Company are featured prominently in the
Company's direct-mail catalogs, in the front of the Company's stores, and on
the BarnesandNoble.com Web site. The Company is continuing to expand the scope
of its publishing program by increasing the number of titles it publishes,
particularly dictionaries, reference books, children's books and classics.
During the 52 weeks ended January 31, 1998, sales of the Company's proprietary
books increased 30% over proprietary book sales during the 53 weeks ended
February 1, 1997.

Mail-Order. Complementing its leadership position as the world's
largest bookseller, Barnes & Noble is the world's largest supplier of books
through direct-mail catalogs*. The Company mails over 15 million catalogs each
year to its in-house mailing list of over one million customers. The Company
acquires new customers by mailing additional catalogs to potential customers
on targeted mailing lists, as well as by placing catalog-request ads in

national and local newspapers and upscale magazines. Through the direct-mail
catalogs, the Company sells publishers' remainders and imported books at up to
80% off publishers' suggested retail prices, as well as the Company's
self-published books under its Barnes & Noble Books imprint. The Company
believes that its extensive catalog mailings over the past eleven years have

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* Based upon sales reported in trade publications and public filings.

created substantial name recognition in the United States and internationally,
which has benefited both the retail stores and the online business.

Strategic Investments. The Company maintains an equity investment in
Chapters, Inc., an Ontario corporation which is publicly traded on the Toronto
Stock Exchange. Chapters is the largest book retailer in Canada and the third
largest in North America*, operating 347 bookstores, including 29 superstores.
The Company also maintains an equity investment in Calendar Club L.L.C., an
operator of seasonal calendar kiosks in the United States and internationally.

Store Operations

The Company has seasoned management teams for its Barnes & Noble and
B. Dalton stores, including those for real estate, merchandising and store
operations. Field management includes regional store directors and district
managers supervising multiple store locations. Each B. Dalton store generally
employs a manager, an assistant manager and approximately seven full- and
part-time booksellers. By comparison, each Barnes & Noble store generally
employs a manager, two assistant managers and approximately 40 full- and
part-time booksellers. Most Barnes & Noble stores also employ a full-time
community relations manager. The Company's large employee base provides the
Company with experienced booksellers to fill positions in the Company's new
Barnes & Noble stores. The Company anticipates that a significant percentage
of the personnel required to manage its expanding business will continue to
come from within its existing operations.

Field management for all of the Company's bookstores, including
regional store directors, district managers and store managers, participate in
a bonus program tied to sales. The Company believes that the compensation of
its field management is competitive with that offered by other specialty
retailers of comparable size.

The Company has a twelve-week manager training program in which
existing store managers train new store managers in all areas of store
operations. Store managers are generally responsible for training other
booksellers in accordance with detailed procedures and guidelines prescribed
by the Company, utilizing training aids available at each bookstore. In
addition, district managers participate in semi-annual training and
merchandising conferences.

Purchasing

Barnes & Noble's buyers negotiate terms, discounts and cooperative
advertising allowances with publishers for all of the Company's bookstores.
The Company's increased use of its distribution center enables it to maximize
available discounts and the Company's multiple strategies greatly enhance its
ability to create customized marketing programs with many of its vendors. The
Company has teams of buyers who specialize in customizing inventory for each
of the Company's bookselling strategies. Store inventories are further
customized by the store managers, who may respond to local demand by
purchasing a limited amount of fast-selling titles through a nationwide
wholesaling network.

The Company purchases books on a regular basis from over 1,600
publishers and approximately 50 wholesale distributors. Purchases from the top
five suppliers (including publishers and wholesale distributors) accounted for
approximately 47% of the Company's book purchases during the 52 weeks ended
January 31, 1998, and no single supplier accounted for more than 16% of the
Company's purchases during this period. Consistent with retail book industry
practice, substantially all of the Company's book purchases are returnable for
full credit, a practice which substantially reduces the Company's risk of
inventory obsolescence.

Publishers control the distribution of titles by virtue of copyright
protection, which limits availability on most titles to a single publisher.
Since the retail, or list, prices of titles, as well as the retailers' cost
price, are also generally determined by publishers, the Company has limited
options concerning availability, cost and profitability of its book inventory.
However, these limitations are mitigated by (i) the substantial number of
titles available (over one million), (ii) the Company's ability to maximize
available discounts and (iii) its positive relationships with publishers, which
are enhanced by the Company's significant purchasing volume.

Publishers periodically offer their excess inventory in the form of
remainder books to book retailers and wholesalers through an auction process
which generally favors booksellers such as the Company who are able to buy
substantial quantities. These books are generally purchased in large
quantities at favorable prices and are then sold to consumers at significant
discounts off publishers' list prices.

Distribution

Over the past three years, the Company has invested significant
capital in its systems and technology, by building new platforms, implementing
new software applications and opening a new distribution center. During
September 1996 the Company opened a new state-of-the-art 344,000 square foot
distribution facility in South Brunswick, New Jersey. Historically, the
Company replenished through its distribution network some of its fast-moving

frontlist titles and bargain and self-published books and had the remaining
inventory drop-shipped directly to the stores from wholesalers and publishers.
Significantly more inventory is sourced through the Company's new distribution
center which provides increased gross margins through more direct buying from
publishers rather than wholesalers, improved store-level just-in-time
deliveries to yield higher sales volumes, and increased inventory turnover.

In addition, the Company's distribution network provides a
significant competitive advantage for BarnesandNoble.com. By stocking nearly
600,000 titles, the Company is currently in a position to provide overnight
delivery service to its online customers at gross margins which can allow the
Company to offer very deep discounts. The Company plans to significantly
increase the number of titles in the distribution center in the next year.

Management Information and Control Systems

The Company has focused a majority of its information resources on
strategically positioning and implementing systems to support store
operations, merchandising and finance. The Company

determined that an open-architecture distributed computing environment would
provide the flexibility needed in the future and as a result a migration to a
client server platform was initiated.

Building on the Company's previous proprietary inventory management
system, during 1996 the Company introduced a new client server store system
("BookMaster"). BookMaster is an inventory management system with integrated
point of sale features that utilizes a proprietary data-warehouse-based
replenishment system. It enhances communications and real-time access to our
network of stores, distribution center and wholesalers. In addition,
implementation of just-in-time replenishment has provided for more rapid
replenishment of books to all stores. The BookMaster system roll-out will be
substantially completed in 1998.

The Company continues to implement systems to improve efficiencies in
back office processing in the human resources, finance and merchandising
areas. An offsite business recovery capability has been developed and
implemented to assure uninterrupted systems support.

Year 2000. The Company is continuing its comprehensive evaluation of
all computer systems and microprocessors and is in the process of replacing,
modifying and/or converting those systems which are not yet year 2000
compliant. The incremental cost over the next two years is being determined as
part of the continuing evaluation. Management does not expect such costs to
have a material adverse effect on the financial position or results of
operations of the Company.

Competition

The retail bookselling business is highly competitive. The Company
competes in the superstore business with Borders Group, Inc. and other
national chains which have substantially fewer superstores than the Company,
and in the mall bookstore business with Walden Book Company, Inc., a
subsidiary of Borders Group, Inc. and the largest operator of mall bookstores
in the country*. The Company also competes with regional chains, as well as
independent single store operators, local multi-store operators, department
stores, variety discounters, drug stores and warehouse clubs. Many of the
Company's competitors have been expanding in both store size and number of
outlets. The Company competes with Internet-based competition from numerous
booksellers including online companies, such as Amazon.com, traditional book
retailers and publishers. The Company expects future online competition
to intensify.

Trademarks and Servicemarks

B. Dalton Bookseller, Bookstar and Book$avers are Company-owned
service marks registered with the United States Patent and Trademark Office.
Barnes & Noble, Doubleday Book Shops and Scribner's Bookstores are federally
registered service marks which have been licensed to the Company under
long-term license agreements which are royalty-free. These license agreements
provide the Company with the exclusive right to use the Doubleday and
Scribner's service marks only in connection with the retail sale of books.

- --------

* Based upon sales reported in trade publications and public filings.

Employees

The Company currently employs approximately 3,500 full-time salaried,
11,000 full-time hourly and between 15,000 and 17,000 part-time hourly
employees. The fluctuation in the number of part-time hourly employees is due
to the seasonality of the business. The Company's employees are not
represented by unions and the Company believes that its relationship with its
employees is excellent.

ITEM 2. PROPERTIES

All but one of the Barnes & Noble stores are leased. The leases
typically provide for an initial term of ten or fifteen years with one or more
renewal options. The terms of the Barnes & Noble store leases for its 482
leased stores open as of January 31, 1998 expire as follows:

Lease Terms to Expire During Number of
(twelve months ending on or about January 31) Stores
-------------

1999.................................................. 3
2000.................................................. 8
2001.................................................. 5
2002.................................................. 9
2003.................................................. 39
2004 and later........................................ 418

All B. Dalton stores are leased. The leases generally provide for an
initial ten-year term with no renewal option. The terms of the 528 B. Dalton
leases as of January 31, 1998 expire as follows:

Lease Terms to Expire During Number of
(twelve months ending on or about January 31) Stores

1999................................................... 150
2000................................................... 58
2001................................................... 78
2002................................................... 46
2003................................................... 32
2004 and later......................................... 164

The Company generally has been able to renew expiring leases on
favorable terms, and believes that renewals of leases expiring in the future
will not have a material adverse effect on the Company's financial condition
or results of operations.

ITEM 3. LEGAL PROCEEDINGS

Various claims and lawsuits arising in the normal course of business
are pending against the Company. The subject matter of these proceedings
primarily includes commercial disputes and employment issues. The results of
these proceedings are not expected to have a material adverse effect on the
Company's consolidated financial position or results of operations.

In March 1998, the American Booksellers Association ("ABA") and
twenty-six independent bookstores filed a lawsuit in the United States
District Court for the Northern District of California against the Company and
Borders Group, Inc. alleging violations of the Robinson-Patman Act, the
California Unfair Trade Practice Act and the California Unfair Competition
Law. The Complaint seeks injunctive and declaratory relief; treble damages on
behalf of each of the bookstore plaintiffs, and, with

respect to the California bookstore plaintiffs, any other damages permitted by
California law; disgorgement of money, property and gains wrongfully obtained
in connection with the purchase of books for resale, or offered for resale, in
California from March 18, 1994 until the action is completed and pre-judgment
interest on any amounts awarded in the action, as well as attorney fees and
costs. The Company intends to vigorously defend the action.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

There were no matters submitted to a vote of security holders during
the 13 weeks ended January 31, 1998.

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS

Price Range of Common Stock

The Company's common stock is traded on the New York Stock Exchange
("NYSE") under the symbol "BKS". The following table sets forth, for the
periods indicated, the high and low sales prices of the common stock on the
NYSE Composite Tape (restated to adjust for the two-for-one stock-split effected
September 22, 1997).

Fiscal 1997 Fiscal 1996
--------------------------- -----------------------
High Low High Low
------------- ---------- ---------- ---------
First Quarter $19 15/16 15 3/16 $18 1/8 11 7/8
Second Quarter 25 1/2 18 1/2 18 7/8 14 3/8
Third Quarter 32 1/4 22 3/8 17 7/8 14 13/16
Fourth Quarter 34 1/4 25 13/16 17 3/16 12 7/8

Approximate Number of Holders of Common Equity

Approximate
Number of
Record Holders
as of
Title of Class March 30, 1998
----------------------
Common stock, $0.001 par value 1,296

Dividends

The terms of the Company's debt agreements restrict payment of cash
dividends. During the 52 weeks ended January 31, 1998, the Company did not

declare or pay any cash dividends or make distributions or payments on its
common stock.

ITEM 6. SELECTED FINANCIAL DATA

The information included in the Company's Annual Report to
Shareholders for the fiscal year ended January 31, 1998 (the "Annual Report")
under the section entitled "Selected Financial Data" is incorporated herein by
reference.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

The information included in the Annual Report under the section
entitled "Management's Discussion and Analysis of Financial Condition and
Results of Operations" is incorporated herein by reference.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The information included in the Annual Report under the sections
entitled: "Consolidated Statements of Operations," "Consolidated Balance
Sheets," "Consolidated Statements of Changes in Shareholders' Equity,"
"Consolidated Statements of Cash Flows" and "Notes to Consolidated Financial
Statements" are incorporated herein by reference.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE

None.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information with respect to directors and executive officers of
the Company is incorporated herein by reference to the Company's definitive
Proxy Statement relating to the Company's 1998 Annual Meeting of Shareholders
to be filed with the Securities and Exchange Commission within 120 days of the
Company's fiscal year ended January 31, 1998 (the "Proxy Statement").

The information with respect to compliance with Section 16(a) of the
Securities Exchange Act is incorporated herein by reference to the Proxy
Statement.

ITEM 11. EXECUTIVE COMPENSATION

The information with respect to executive compensation is
incorporated herein by reference to the Proxy Statement.

The information with respect to compensation of directors is
incorporated herein by reference to the Proxy Statement.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT

The information with respect to security ownership of certain
beneficial owners and management is incorporated herein by reference to the
Proxy Statement.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information with respect to certain relationships and related
transactions is incorporated herein by reference to the Proxy Statement.

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K

(a) 1. Consolidated Financial Statements:

(i) "The Report of Independent Certified Public Accountants"
included in the Annual Report is incorporated herein by
reference.

(ii) The information included in the Annual Report under the
sections entitled: "Consolidated Statements of Operations,"
"Consolidated Balance Sheets," "Consolidated Statements of
Changes in Shareholders Equity," "Consolidated Statements of
Cash Flows" and "Notes to Consolidated Financial Statements"
are incorporated herein by reference.

2. Schedules:

All schedules are omitted because the information is either not
applicable or is contained in the consolidated financial statements
incorporated herein by reference.

3. Exhibits:

The following are filed as Exhibits to this form:

Exhibit
No. Description
- ------------ -----------

3.1 Amended and Restated Certificate of Incorporation of the Company, as
amended.(1)

3.2 Amendment to the Amended and Restated Certificate of Incorporation of
the Company filed May 30, 1996.(2)

3.3 Amended and Restated By-laws of the Company.(1)

3.4 Amendment to the Company's By-laws adopted May 31, 1995.(3)

4.1 Specimen Common Stock certificate. (1)

10.1 Amended and Restated Credit Agreement, dated as of November 18, 1997,
among the Company, its subsidiaries, The Chase Manhattan Bank
(National Association), as Administrative Agent (the "Agent") and the
Banks party thereto. (5)

10.2 Pledge and Security Agreement dated as of March 15, 1996, among the
Company, its subsidiaries and the Agent. (4)

10.3 Amendment to the Pledge and Security Agreement dated as of November
18, 1997. (5)

10.4 1996 Incentive Plan. (2)

10.5 1991 Employee Incentive Plan. (1)

10.6 Extended Savings Plan. (1)

10.7 Amendment to the Extended Savings Plan dated as of December 22, 1995.
(4)

10.8 Amended and Restated Employees' Retirement Plan dated as of January
1, 1998. (5)

10.9 Supplemental Compensation Plan. (7)

10.10 License Agreement for "Barnes & Noble" service mark, dated as of
February 11, 1987. (1)

10.11 Consents to "Barnes & Noble" License Agreement Assignments, dated as
of November 18, 1988 and November 16, 1992, respectively. (4)

10.12 License Agreement for "Doubleday Book Shops" service mark, dated as
of May 31, 1990. (1)

10.13 License Agreement for "Scribner's Bookstores" mark, dated as of
February 21, 1989. (1)

10.14 Lease dated June 3, 1987 between B. Dalton, as tenant, and Bromley
Rockleigh Associates, L.P., as landlord.(1)

10.15 Services Agreement, dated as of November 16, 1992, between Barnes &
Noble Bookstores, Inc. and the Company.(1)

10.16 Aircraft Use Agreement, dated as of June 30, 1993, between the
Company and B&N Aircraft Company, Inc. (6)

10.17 Asset Purchase Agreement dated as of July 29, 1996 among NeoStar
Retail Group, Inc. (and its wholly owned subsidiary, Software Etc.
Stores, Inc.) and Barnes & Noble, Inc. (8)

10.18 Stock Option and Repurchase Agreements, dated as of August 1, 1988,
between the Company and each of Mitchell S. Klipper and Stephen
Riggio, as

Exhibit
No. Description
- ------------ -----------

amended November 16, 1992. (6)

10.19 Stock Option Certificates, dated March 15, 1993, granting options to
purchase Common Stock to each of Mitchell S. Klipper, Stephen Riggio
and Irene R. Miller pursuant to the Company's 1991 Employee Incentive
Plan. (6)

10.20 Employment Agreements between the Company and each of Mitchell S.
Klipper and Stephen Riggio, dated as of April 1, 1993 and July 15,
1993, respectively (collectively the "Employment Agreements"). (6)

10.21 Amendment to each of the Employment Agreements dated as of April 1,
1998. (5)

10.22 Stock Option Certificates, dated September 28, 1993, granting options
to purchase Common Stock to Leonard Riggio, Mitchell S. Klipper and
Stephen Riggio. (9)

13.1 The sections of the Company's Annual Report entitled: "Selected
Financial Data", "Management's Discussion and Analysis of Financial
Condition and Results of Operations", "Consolidated Statements of
Operations", "Consolidated Balance Sheets", "Consolidated Statements
of Changes in Shareholders' Equity", "Consolidated Statements of Cash
Flows", "Notes to Consolidated Financial Statements" and "The Report
of Independent Certified Public Accountants".(5)

21.1 List of subsidiaries. (5)

23.1 Consent of BDO Seidman, LLP. (5)

- ---------------------------

(1) Previously filed as an exhibit to the Company's Registration
Statement on Form S-4 (Commission File No. 33-59778) and incorporated
herein by reference.

(2) Previously filed as an exhibit to the Company's Form 10-Q for the
fiscal quarter ended April 27, 1996.

(3) Previously filed as an exhibit to the Company's Form 10-Q for the
fiscal quarter ended April 29, 1995.

(4) Previously filed as an exhibit to the Company's Form 10-K for the
fiscal year ended January 27, 1996.

(5) Filed herewith.

(6) Previously filed as an exhibit to the Company's Registration
Statement on Form S-1 (Commission File No. 33-50548) and incorporated
herein by reference.

(7) Previously filed as an exhibit to the Company's Form 10-Q for the
fiscal quarter ended July 29, 1995.

(8) Previously filed as an exhibit to the Company's Form 10-Q for the
fiscal quarter ended July 27, 1996.

(9) Previously filed as an exhibit to the Company's Registration
Statement on Form S-1 (Commission File No. 33-77484) and incorporated
herein by reference.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.

BARNES & NOBLE, INC.
(Registrant)

By: /s/ Leonard Riggio
--------------------------
Leonard Riggio, Chairman
of the Board and Chief
Executive Officer
May 1, 1998

Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.

Name Title Date
- ---- ----- ----

/s/ Leonard Riggio Chairman of the Board and Chief May 1, 1998
- ------------------------------------ Executive Officer
Leonard Riggio

/s/ Stephen Riggio Vice Chairman May 1, 1998
- ------------------------------------
Stephen Riggio

/s/ Michael N. Rosen Secretary and Director May 1, 1998
- ------------------------------------
Michael N. Rosen

/s/ Matthew A. Berdon Director May 1, 1998
- ------------------------------------
Matthew A. Berdon

/s/ William Dillard, II Director May 1, 1998
- ------------------------------------
William Dillard, II

/s/ Jan Michiel Hessels Director May 1, 1998
- ------------------------------------
Jan Michiel Hessels

/s/ Irene R. Miller Director May 1, 1998
- ------------------------------------
Irene R. Miller

/s/ Margaret T. Monaco Director May 1, 1998
- ------------------------------------
Margaret T. Monaco

/s/ William Sheluck, Jr. Director May 1, 1998
- ------------------------------------
William Sheluck, Jr.