# Barnes & Noble Education, Inc. (BNED) FY 2026 MD&A

Verbatim Item 7 Management's Discussion and Analysis from Barnes & Noble Education, Inc.'s 10-K for fiscal year 2026.

SEC filing source: https://www.sec.gov/Archives/edgar/data/1634117/000163411726000070/bned-20260502.htm
Accession: 0001634117-26-000070
Filing date: 2026-07-09
Report date: 2026-05-02
Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary. Published MD&A gate trimmed front/tail over-capture.
Confidence: high

Company profile: /company/BNED/
All MD&A years: /company/BNED/mda/
Previous year: /company/BNED/mda/fy2025/ (FY 2025)

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

Unless the context otherwise indicates, references to “we,” “us,” “our” and “the Company” refer to Barnes & Noble Education, Inc. or “BNED”, a Delaware corporation. References to “Barnes & Noble College” or “BNC” refer to our subsidiary Barnes & Noble College Booksellers, LLC. References to “MBS” refer to our subsidiary MBS Textbook Exchange, LLC.

Our fiscal year is comprised of 52 or 53 weeks, ending on the Saturday closest to the last day of April. “Fiscal 2026” means the 52 weeks ended May 2, 2026, “Fiscal 2025” means the 53 weeks ended May 3, 2025.

The following should be read in conjunction with "Disclosures Regarding Forward-Looking Statements" and our consolidated financial statements and notes thereto included in Item 15 of this Annual Report on Form 10-K (this “Form 10-K”).

Overview

Description of Business

Barnes & Noble Education, Inc. (“BNED”) is one of the largest contract operators of physical and virtual bookstores for college and university campuses and K-12 institutions across the United States. We are also one of the largest textbook wholesalers and inventory management hardware and software providers. We operate 1,116 physical and virtual bookstores, delivering essential educational content and general merchandise within a dynamic omnichannel retail environment. The Barnes & Noble brand (licensed from our former parent) and our subsidiary brands, BNC and MBS, are important to our relationships with leading publishers who rely on us as one of their primary distribution channels. For a detailed description of our business, products and services, strategic initiatives, key relationships, and competitive position, see “Business” in Part I, Item 1 of this Form 10-K.

BNC First Day®

The strengths of our business include our ability to compete by developing new products and solutions to meet market needs, our large operating footprint with direct access to students and faculty, our well-established, deep relationships with academic partners and stable, long-term contracts and our well-recognized brands. We provide product and service offerings designed to address the most pressing issues in higher education, including affordable access, enhanced convenience and improved affordability through innovative course material delivery models designed to drive improved student experiences and outcomes. We offer our BNC First Day® affordable access course material programs, consisting of First Day Complete and First Day, which provide faculty required course materials on or before the first day of class at below market rates, as compared to the total retail price for the same course materials if purchased separately (a la carte), and students are billed the below market rate directly by the institution as a course charge or included in tuition. During the 52 weeks ended May 2, 2026, BNC First Day® total revenue increased by $166.3 million, or 28.0%, to $760.1 million compared to $593.8 million during the prior year period. These programs have allowed us to reverse historical long-term trends in course materials revenue declines, which has been observed at those schools where such programs have been adopted, and improve predictability of our future results. In Fiscal 2026, the growth of our BNC First Day® programs offset the declines in a la carte courseware sales and closed store sales. We continue to see strong institutional interest in First Day Complete and First Day programs, reflecting an ongoing shift by colleges and universities toward affordable access course material models that increase student participation and improve access to required course materials.

The following table summarizes our BNC First Day® sales for the 52 weeks ended May 2, 2026 and the 53 weeks ended May 3, 2025:

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[[GREPCENT_TABLE]]
[["Dollars in millions","","52 weeks ended","","53 weeks ended"],["","","May 2, 2026","","May 3, 2025","","$ Increase","","% Change"],["First Day Complete Sales","","$","500.8","","","$","376.3","","","$","124.5","","","33%"],["First Day Sales","","$","259.3","","","$","217.5","","","$","41.8","","","19%"],["Total BNC First Day\u00ae Sales","","$","760.1","","","$","593.8","","","$","166.3","","","28%"],["First Day Complete","","Spring 2026","","Spring 2025","","# Increase","","% Change"],["Number of campus stores","","232","","191","","41","","21%"],["Estimated enrollment (a)","","1,250,585","","957,000","","293,585","","31%"],["(a) Total undergraduate and graduate student enrollment as reported by National Center for Education Statistics (NCES) as of January 6, 2026."]]
[[/GREPCENT_TABLE]]

Relationship with Fanatics and Lids

We have strategic service provider relationships with Fanatics Retail Group Fulfillment, LLC (“Fanatics”) and Fanatics Lids College, Inc. D/B/A “Lids” (together with Fanatics, the “F/L Relationship”), which provide e-commerce capabilities, product assortment expertise, and digital marketing tools to accelerate growth of our logo general merchandise business. As the logo and emblematic general merchandise sales are fulfilled by Lids and Fanatics, we recognize commission revenue earned for these sales on a net basis in our consolidated financial statements. For a full description of the F/L Relationship, see “Relationship with Fanatics and Lids” in Part I, Item 1, Business.

Financing Arrangements

On June 10, 2024, we completed various transactions (the “Transactions”), including an equity rights offering, private equity investment, Term Loan debt conversion, and Credit Facility refinancing, to substantially deleverage our Consolidated Balance Sheet. For a detailed description of these transactions, see “Financing Arrangements” in Part I, Item 1, Business and Note 10, Debt, in the Notes to Consolidated Financial Statements.

Segments

We identify our segments in accordance with the way our business is managed. The current CEO (the current Chief Operating Decision Maker ("CODM")) assesses performance and allocates resources. The Company currently operates as a single operating and reportable segment.

Seasonality

Our business is highly seasonal, particularly with respect to textbook sales and rentals, with the major portion of sales and operating profit realized during the second and third fiscal quarters when college students generally purchase and rent textbooks for the upcoming semesters and lowest in the first and fourth fiscal quarters. Our quarterly results also may fluctuate depending on the timing of the start of the various schools’ semesters, as well as shifts in our fiscal calendar dates. These shifts in timing may affect the comparability of our results across periods.

Revenue Recognition

Product sales are recognized when the customer takes physical possession of our products, which occurs either at the point of sale for products purchased at physical locations or upon receipt of our products by our customers for products ordered through our websites and virtual bookstores. Revenue from the sale of digital textbooks, which contains a single performance obligation, is recognized upon delivery of the digital content as product revenue in our consolidated financial statements. Revenue from the rental of physical textbooks is deferred and recognized over the rental period based on the passage of time commencing at the point of sale, when control of the product transfers to the customer and is recognized as rental income in our consolidated financial statements. Depending on the product mix offered under the BNC First Day® offerings, revenue recognized is consistent with our policies for product, digital and rental sales, net of an anticipated opt-out or return provision.

Cash Collection Timing

Given the growth of BNC First Day® affordable access course material programs, the timing of cash collection from our school partners may shift to periods subsequent to when the revenue is recognized. When a school adopts our BNC First Day® affordable access course material offerings, cash collection from the school generally occurs after the institution's drop/add dates, which is later in the working capital cycle, particularly in our third quarter given the timing of the Spring Term and our quarterly reporting period, as compared to direct-to-student point-of-sale transactions where cash is generally collected during the point-of-sale transaction or within a few days from the credit card processor. As a higher percentage of our sales shift to BNC First Day® affordable access course material program offerings, we are focused on efforts to better align the timing of our

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cash outflows to course material vendors and cash inflows from collections from schools. As the concentration of digital product sales increases, revenue will be recognized earlier during the academic term as digital textbook revenue is recognized when the digital content is made available to the customer compared to: (i) the rental of physical textbooks where revenue is recognized over the rental period, and (ii) a la carte courseware sales where revenue is recognized when the customer takes physical possession of our products, which occurs either at the point of sale for products purchased at physical locations or upon receipt of our products by our customers for products ordered through our websites and virtual bookstores.

Trends and Other Factors Affecting Our Business

For a discussion of our trends and other factors affecting our business, see Part I - Item 1. Business and Item 1A, Risk Factors.

Results of Operations

Elements of Results of Operations

Our consolidated financial statements reflect our consolidated financial position, results of operations and cash flows in conformity with accounting principles generally accepted in the United States (“GAAP”). The results of operations reflected in our consolidated financial statements are presented on a consolidated basis. All intercompany accounts and transactions have been eliminated in consolidation.

Our sales are primarily derived from the sale of course materials, which include new, used, rental and digital textbooks, and general merchandise, including emblematic apparel and gifts, trade books, computer products, school and dorm supplies, convenience and café items and graduation products. Our rental income is primarily derived from the rental of physical textbooks. We also derive revenue from other sources, such as sales of inventory management, hardware and point-of-sale software, and other services.

Our cost of sales primarily includes costs such as merchandise costs, textbook rental amortization, warehouse costs related to inventory management and order fulfillment, certain payroll costs, and management service agreement costs, including rent expense, related to our college and university contracts and other facility related expenses.

Our selling and administrative expenses consist primarily of store payroll and store operating expenses. Selling and administrative expenses also include long-term incentive plan compensation expense and general office expenses, such as merchandising, procurement, field support, and finance and accounting.

Results of Operations Summary (a)

For a detailed discussion of Fiscal 2026 and year-over-year comparison to Fiscal 2025, see Results of Operations below.

[[GREPCENT_TABLE]]
[["","","","","","52 weeks ended","","53 weeks ended"],["Dollars in thousands","","","","","May 2, 2026","","May 3, 2025"],["Sales:"],["Product sales and other","","","","","$","1,564,365","","","$","1,463,245"],["Rental income","","","","","150,405","","","146,925"],["Total sales","","","","","$","1,714,770","","","$","1,610,170"],["Gross profit","","","","","$","366,168","","","$","337,804"],["Income (loss) before income taxes","","","","","$","20,672","","","$","(61,569)"],["Net income (loss)","","","","","$","16,872","","","$","(65,825)"],["Adjusted Net income (loss) (a)","","","","","$","22,262","","","$","(61,717)"],["Adjusted EBITDA (a)"],["Total Adjusted EBITDA","","","","","$","76,513","","","$","59,390"]]
[[/GREPCENT_TABLE]]

(a)Adjusted Net income (loss) and Adjusted EBITDA are non-GAAP financial measures. See Use of Non-GAAP Measures.

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Results of Operations - 52 weeks ended May 2, 2026, compared with the 53 weeks ended May 3, 2025

[[GREPCENT_TABLE]]
[["","52 weeks ended","","53 weeks ended"],["Dollars in thousands","May 2, 2026","","May 3, 2025"],["Sales:"],["Product sales and other","$","1,564,365","","","$","1,463,245"],["Rental income","150,405","","","146,925"],["Total sales","1,714,770","","","1,610,170"],["Cost of sales (exclusive of depreciation and amortization expense):"],["Product and other cost of sales","1,269,051","","","1,193,015"],["Rental cost of sales","79,551","","","79,351"],["Total cost of sales","1,348,602","","","1,272,366"],["Gross profit","366,168","","","337,804"],["Selling and administrative expenses","288,573","","","283,800"],["Depreciation and amortization expense","32,754","","","37,939"],["Impairment loss","12,584","","","1,713"],["Other (income) expense, net","(4,281)","","","(1,572)"],["Operating income","$","36,538","","","$","15,924"]]
[[/GREPCENT_TABLE]]

Percentage of Total Sales:

[[GREPCENT_TABLE]]
[["","52 weeks ended","","53 weeks ended"],["","May 2, 2026","","May 3, 2025"],["Sales:"],["Product sales and other","91.2","%","","90.9","%"],["Rental income","8.8","%","","9.1","%"],["Total sales","100","%","","100","%"],["Cost of sales (exclusive of depreciation and amortization expense):"],["Product and other cost of sales","81.1","%","","81.5","%"],["Rental cost of sales","52.9","%","","54.0","%"],["Total cost of sales","78.6","%","","79.0","%"],["Gross margin","21.4","%","","21.0","%"],["Selling and administrative expenses","16.8","%","","17.6","%"],["Depreciation and amortization expense","1.9","%","","2.4","%"],["Impairment loss","0.7","%","","0.1","%"],["Other (income) expense, net","(0.2)","%","","(0.1)","%"],["Operating income","2.1","%","","1.0","%"]]
[[/GREPCENT_TABLE]]

Sales

The following table summarizes our sales:

[[GREPCENT_TABLE]]
[["","","","","","52 weeks ended","","53 weeks ended"],["Dollars in thousands","","","","","May 2, 2026","","May 3, 2025","","$ Increase","% Change"],["Product sales and other","","","","","$","1,564,365","","","$","1,463,245","","","$","101,120","","6.9%"],["Rental income","","","","","150,405","","","146,925","","","$","3,480","","2.4%"],["Total sales","","","","","$","1,714,770","","","$","1,610,170","","","$","104,600","","6.5%"]]
[[/GREPCENT_TABLE]]

Our total sales increased by $104.6 million, or 6.5%, to $1,714.8 million during the 52 weeks ended May 2, 2026 from $1,610.2 million during the 53 weeks ended May 3, 2025 which is primarily related to improved comparable store sales driven by growth in our BNC First Day® programs and new store sales, offset by declines in general merchandise sales, a la carte course material sales and lower sales as a result of closed stores.

The components of the sales variances are reflected in the table below:

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Index to Form 10-K Index to FS

[[GREPCENT_TABLE]]
[["Sales variances","","52 weeks ended May 2, 2026"],["Dollars in millions"],["New stores","","$","100.0"],["Closed stores","","(69.0)"],["Comparable stores (a)","","83.0"],["Textbook rental deferral","","(0.3)"],["Other (b)","","(9.1)"],["Total sales variance:","","$","104.6"]]
[[/GREPCENT_TABLE]]

(a)Logo general merchandise sales recognized on a net basis as commission revenue in the Consolidated Financial Statements. For Gross Comparable Store Sales details, see below.

(b)Other includes inventory liquidation sales to third parties, marketplace sales and other deferred items.

The following is a store count summary for physical stores.

[[GREPCENT_TABLE]]
[["","May 2, 2026","","May 3, 2025"],["Number of Stores:","Physical","","Virtual","","Total","","Physical","","Virtual","","Total"],["Beginning of period","653","","","493","","","1,146","","","707","","","538","","","1,245"],["Opened","50","","","14","","","64","","","32","","","24","","","56"],["Closed","56","","","38","","","94","","","86","","","69","","","155"],["End of period","647","","","469","","","1,116","","","653","","","493","","","1,146"]]
[[/GREPCENT_TABLE]]

During the 52 weeks ended May 2, 2026, we opened 64 stores that contributed approximately $100.0 million of sales in Fiscal 2026, and closed 94 physical and virtual stores that had estimated net annual sales of $69.0 million. The Company’s strategic initiative is to close under-performing and less profitable stores.

Generally, sales are impacted by revenue from net new/closed stores, conversion to BNC First Day® programs, increased campus and eCommerce website traffic, and an increase in the number of on campus activities and events, such as graduations, athletic events, alumni events and prospective student campus tours.

•Product sales and other, which consists of sales of course material products, general merchandise and services and other revenue, increased by $101.1 million, or 6.9%, to $1,564.4 million during the 52 weeks ended May 2, 2026 from $1,463.2 million during the 53 weeks ended May 3, 2025.

◦Course material product sales increased by $107.3 million, or 10.5%, to $1,128.8 million during the 52 weeks ended May 2, 2026, compared to $1,021.5 million in the prior year period. The increase was primarily due to the growth of our BNC First Day® programs, which increased by $166.3 million, or 28.0%, to $760.1 million, and new store sales, offset by a decline in a la carte courseware sales and including lower sales resulting from closed stores.

[[GREPCENT_TABLE]]
[["Dollars in millions","","52 weeks ended","","53 weeks ended"],["","","May 2, 2026","","May 3, 2025","","$ Increase","","% Change"],["First Day Complete Sales","","$","500.8","","","$","376.3","","","$","124.5","","","33%"],["First Day Sales","","259.3","","","217.5","","","$","41.8","","","19%"],["Total BNC First Day\u00ae Sales","","$","760.1","","","$","593.8","","","$","166.3","","","28%"],["First Day Complete","","Spring 2026","","Spring 2025","","# Increase","","% Change"],["Number of campus stores","","232","","191","","41","","21%"],["Estimated enrollment (a)","","1,250,585","","957,000","","293,585","","31%"],["(a) Total undergraduate and graduate student enrollment as reported by National Center for Education Statistics (NCES) as of January 6, 2026."]]
[[/GREPCENT_TABLE]]

◦General merchandise product net sales increased by $2.8 million, or 0.8%, to $358.1 million, compared to $355.3 million in the prior year period, primarily due to higher graduation product and cafe and convenience product sales.

◦Service and other revenue decreased by $9.1 million, or 10.5%, to $77.4 million, compared to $86.5 million in the prior year period, primarily due lower liquidation and marketplace sales.

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•Rental income for course materials increased by $3.5 million, or 2.4%, to $150.4 million during the 52 weeks ended May 2, 2026 from $146.9 million during the 53 weeks ended May 3, 2025, primarily due to the growth of our BNC First Day® programs, partially offset by closed stores and the shift to digital products.

Gross Comparable Store Sales

To supplement the Total Sales table presented above, the Company uses Gross Comparable Store Sales as a key performance indicator. Gross Comparable Store Sales includes sales from physical and virtual stores that have been open for an entire fiscal year period and does not include sales from permanently closed stores for all periods presented. For Gross Comparable Store Sales, sales for logo general merchandise fulfilled by Lids, Fanatics and digital agency sales are included on a gross basis in Gross Comparable Store Sales compared to a net basis as commission revenue in our consolidated financial statements.

We believe the current Gross Comparable Store Sales calculation method reflects management’s view that such comparable store sales are an important measure of the growth in sales when evaluating how established stores have performed over time. We present this metric as additional useful information about the Company’s operational and financial performance and to allow greater transparency with respect to important metrics used by management for operating and financial decision-making. Gross Comparable Store Sales are also referred to as "same-store" sales by others within the retail industry and the method of calculating comparable store sales varies across the retail industry. As a result, our calculation of comparable store sales is not necessarily comparable to similarly titled measures reported by other companies and is intended only as supplemental information and is not a substitute for net sales presented in accordance with GAAP.

Gross Comparable Store Sales increased by $71.3 million or 4.4% during the 52 weeks ended May 2, 2026, primarily driven by an increase in Course Materials sales, partially offset by lower General Merchandise sales. Course Materials sales increased by $82.3 million or 7.6% primarily due to the growth of BNC First Day® affordable access course material programs (as discussed above), offset by declines in a la carte courseware sales.

Gross Comparable Store Sales variances by category are as follows:

[[GREPCENT_TABLE]]
[["","","52 weeks ended","","53 weeks ended"],["Dollars in millions","","May 2, 2026","","May 3, 2025"],["Textbooks (Course Materials)","","$","82.3","","","7.6%","","$","106.7","","","10.6%"],["General Merchandise","","(11.0)","","","(2.1)%","","10.5","","","1.9%"],["Total Gross Comparable Store Sales","","$","71.3","","","4.4%","","$","117.2","","","7.5%"]]
[[/GREPCENT_TABLE]]

Cost of Sales and Gross Margin

Our cost of sales decreased as a percentage of sales to 78.6% during the 52 weeks ended May 2, 2026 compared to 79.0% during the 53 weeks ended May 3, 2025. Our gross margin increased by $28.4 million, or 8.4%, to $366.2 million, or 21.4% of sales, during the 52 weeks ended May 2, 2026 from $337.8 million, or 21.0% of sales, during the 53 weeks ended May 3, 2025.

The following table summarizes the cost of sales:

[[GREPCENT_TABLE]]
[["","","","","","","","","","52 weeks ended","","53 weeks ended"],["Dollars in thousands","","","","","","","","","May 2, 2026","","% of Related Sales","","May 3, 2025","","% of Related Sales"],["Product and other cost of sales","","","","","","","","","$","1,269,051","","","81.1%","","$","1,193,015","","","81.5%"],["Rental cost of sales","","","","","","","","","$","79,551","","","52.9%","","$","79,351","","","54.0%"],["Total cost of sales","","","","","","","","","$","1,348,602","","","78.6%","","$","1,272,366","","","79.0%"]]
[[/GREPCENT_TABLE]]

The following table summarizes the gross margin for the 52 and 53weeks ended May 2, 2026 and May 3, 2025:

[[GREPCENT_TABLE]]
[["","","","","","","","","","52 weeks ended","","53 weeks ended"],["Dollars in thousands","","","","","","","","","May 2, 2026","","% of Related Sales","","May 3, 2025","","% of Related Sales"],["Product and other gross margin","","","","","","","","","$","295,314","","","18.9%","","$","270,230","","","18.5%"],["Rental gross margin","","","","","","","","","70,854","","","47.1%","","67,574","","","46.0%"],["Gross Margin","","","","","","","","","$","366,168","","","21.4%","","$","337,804","","","21.0%"]]
[[/GREPCENT_TABLE]]

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For the 52 weeks ended May 2, 2026, the gross margin as a percentage of sales increased as discussed below:

•Product and other gross margin increased 40 basis points from prior year, primarily due to lower contract costs as a percentage of sales related to our college and university contracts as a result of the shift to digital and First Day models, partially offset by unfavorable logo, general merchandise, liquidation and marketplace.

•Rental gross margin as a percentage of sales increased 1.1% from prior year, primarily reflecting lower contract costs as a percentage of sales associated with the continued expansion of our BNC First Day® programs and increased participation in affordable access course material offerings.

Selling and Administrative Expenses

[[GREPCENT_TABLE]]
[["","","","52 weeks ended","","53 weeks ended"],["Dollars in thousands","","","","","","","","","May 2, 2026","","% of Sales","","May 3, 2025","","% of Sales"],["Selling and administrative expenses","","","","","","","","","$","288,573","","","16.8%","","$","283,800","","","17.6%"]]
[[/GREPCENT_TABLE]]

During the 52 weeks ended May 2, 2026, selling and administrative expenses as a percentage of sales decreased 80 basis points as compared to the 53 weeks ended May 3, 2026 as a result in continued cost containment efforts in addition to overall sales growth.

Depreciation and Amortization Expense

[[GREPCENT_TABLE]]
[["","","","52 weeks ended","","53 weeks ended"],["Dollars in thousands","","","","","","","","","May 2, 2026","","% of Sales","","May 3, 2025","","% of Sales"],["Depreciation and amortization expense","","","","","","","","","$","32,754","","","1.9%","","$","37,939","","","2.4%"]]
[[/GREPCENT_TABLE]]

Depreciation and amortization expense decreased by $5.2 million to $32.8 million during the 52 weeks ended May 2, 2026 from $37.9 million during the 53 weeks ended May 3, 2025 primarily due to lower depreciable assets and intangibles due store closures during Fiscal 2026.

Impairment Loss

We review our long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

During the 52 weeks ended May 2, 2026, we evaluated certain of our store-level long-lived assets for impairment. Based on the results of the impairment tests, we recognized an impairment loss of $12.6 million (both pre-tax and after-tax), comprised of $2.8 million, $6.0 million, and $3.8 million of property and equipment, operating lease right-of-use assets, and amortizable intangibles, respectively, on the Consolidated Statement of Operations.

During the 53 weeks ended May 3, 2025, we evaluated certain of our store-level long-lived assets for impairment. Based on the results of the impairment tests, we recognized an impairment loss of $1.7 million (both pre-tax and after-tax), comprised of $0.3 million, $0.3 million, and $1.1 million of property and equipment, operating lease right-of-use assets, and amortizable intangibles, respectively, on the Consolidated Statement of Operations.

For additional information, see Part 1I - Item 8. Financial Statements and Supplementary Data, Note 3, - Store Closures and Impairment of Long-Lived Assets and Note 8. Fair Value Measurements.

Other (Income) and Expense, net

During the 52 weeks ended May 2, 2026, we recognized other income totaling $4.3 million. During the fourth quarter of fiscal 2026, the Company recognized income of approximately $12.6 million related to the resolution of its participation interest purchase agreement associated with the Visa/Mastercard interchange litigation. The income represents the recognition of previously deferred amounts upon settlement of the underlying litigation. See Note 9, Participation Interest Purchase Agreements for additional details. This was offset by professional fees related to the Investigation cost of $7.3 million and other professional service fees of $1.0 million. See Part II - Item 8. - Financial Statements and Supplementary Data - Note 2. Summary of Significant Accounting Policies.

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During the 53 weeks ended May 3, 2025, we recognized other expense totaling $1.6 million, comprised primarily of an $8.8 million gain related to the termination of liabilities related to a frozen retirement benefits plan, primarily offset by $2.1 million related to severance and other employee termination and benefit costs associated with elimination of various positions as part of cost reduction initiatives, $2.1 million for legal and advisory professional service costs primarily related to restructuring activities and other charges of $2.0 million of severance primarily related to the resignation of our former Chief Executive Officer on June 11, 2024, $1.4 million of which is included in accrued liabilities in the Consolidated Balance Sheet as of May 3, 2025, and $1.1 million related to the settlement of a class action lawsuit and related legal fees. We recognized an increase to additional paid in capital on the Consolidated Balance Sheet for the reimbursement of the former Chief Executive Officer severance from VitalSource (a principal stockholder) as part of the June 10, 2024 financing transactions.

Operating Income (Loss)

[[GREPCENT_TABLE]]
[["","","","","","","","","","52 weeks ended","","53 weeks ended"],["Dollars in thousands","","","","","","","","","May 2, 2026","","% of Sales","","May 3, 2025","","% of Sales"],["Operating income (loss)","","","","","","","","","$","36,538","","","2.1%","","$","15,924","","","1.0%"]]
[[/GREPCENT_TABLE]]

Our operating income was $36.5 million during the 52 weeks ended May 2, 2026 compared to operating income of $15.9 million during the 53 weeks ended May 3, 2025. The improvements in operating results were due to the matters discussed above.

Loss on extinguishment of debt

On June 10, 2024, our existing Term Loan lenders converted approximately $34.0 million of outstanding principal and accrued and unpaid interest into our Common Stock. We recognized a loss on extinguishment of debt of $55.2 million during the 53 weeks ended May 3, 2025 in the Consolidated Statement of Operations in connection with the Term Loan Debt Conversion which represents the difference between the Common Stock fair value issued upon conversion and the net carrying value of the Term Loan, plus unamortized deferred financing costs related to the Term Loan. As a result of the Term Loan Debt Conversion, the Term Loan and its related agreements were terminated. There were no debt conversions in the comparable prior period. See Part II - Item 8. Financial Statements and Supplementary Data - Note 6. Equity and Note 10. Debt.

Interest Expense, Net

[[GREPCENT_TABLE]]
[["","","52 weeks ended","","53 weeks ended"],["Dollars in thousands","","May 2, 2026","","May 3, 2025"],["Interest expense, net","","$","15,866","","","$","22,260"]]
[[/GREPCENT_TABLE]]

Net interest expense decreased by $6.4 million to $15.9 million during the 52 weeks ended May 2, 2026 from $22.3 million during the 53 weeks ended May 3, 2025. Interest expense decreased primarily due to lower borrowings, lower interest rates and a $1.5 million decrease in amortization of deferred financing costs. The following table disaggregates interest expense for the 52-week period:

[[GREPCENT_TABLE]]
[["","","52 weeks ended","","53 weeks ended"],["Dollars in thousands","","May 2, 2026","","May 3, 2025"],["Interest Incurred"],["Credit Facility","","$","12,290","","","$","16,279"],["Term Loan","","\u2014","","","1,167"],["Total Interest Incurred","","$","12,290","","","$","17,446"],["Amortization of Deferred Financing Costs"],["Credit Facility","","$","3,662","","","$","5,014"],["Term Loan","","\u2014","","","150"],["Total Amortization of Deferred Financing Costs","","$","3,662","","","$","5,164"],["Interest Income, net of expense","","$","(86)","","","$","(350)"],["Total Interest Expense","","$","15,866","","","$","22,260"]]
[[/GREPCENT_TABLE]]

Cash interest paid during the 52 weeks ended May 2, 2026 and the 53 weeks ended May 3, 2025 was $12.5 million and $17.9 million, respectively.

44

Index to Form 10-K Index to FS

Income Tax Expense

[[GREPCENT_TABLE]]
[["","","","","","","","","","52 weeks ended","","52 weeks ended"],["Dollars in thousands","","","","","","","","","May 2, 2026","","Effective Rate","","May 3, 2025","","Effective Rate"],["Income tax expense","","","","","","","","","$","3,800","","","18.3%","","$","4,256","","","(6.9)%"]]
[[/GREPCENT_TABLE]]

We recorded an income tax expense of $3.8 million on a pre-tax income of $20.7 million during the 52 weeks ended May 2, 2026, which represented an effective income tax rate of 18.3% and an income tax expense of $4.3 million on a pre-tax loss of $61.6 million during the 53 weeks ended May 3, 2025, which represented an effective income tax rate of (6.9%).

The effective tax rate for the 52 weeks ended May 2, 2026 is higher than the prior year comparable period due to permanent differences related to the debt-to-equity conversion in the prior year period.

[[GREPCENT_TABLE]]
[["","","","","","52 weeks ended","","53 weeks ended"],["Dollars in thousands","","","","","May 2, 2026","","May 3, 2025"],["Net income (loss)","","","","","$","16,872","","","$","(65,825)"]]
[[/GREPCENT_TABLE]]

As a result of the factors discussed above, we reported a net income of $16.9 million during the 52 weeks ended May 2, 2026, compared with a net loss of $(65.8) million during the 53 weeks ended May 3, 2025. Adjusted Net income is $22.3 million during the 52 weeks ended May 2, 2026, compared with a Adjusted Net loss of $(61.7) million during the 53 weeks ended May 3, 2025. See Adjusted Net income (loss) below.

Use of Non-GAAP Measures - Adjusted Net Income (Loss), Adjusted EBITDA, and Adjusted Free Cash Flow

To supplement our results prepared in accordance with generally accepted accounting principles (“GAAP”), we present certain non-GAAP financial measures, including Adjusted Net Income (Loss), Adjusted EBITDA, and Adjusted Free Cash Flow. These measures are "non-GAAP financial measures" as defined in Regulation G of the Securities Exchange Act of 1934 and Item 10(e) of Regulation S-K.

We define Adjusted Net Income (Loss) as net income (loss), the most directly comparable GAAP measure, adjusted for certain reconciling items that are subtracted from or added to net income (loss). We define Adjusted EBITDA as net income (loss), the most directly comparable GAAP measure, plus (1) depreciation and amortization; (2) interest expense (3) income taxes; and (4) as adjusted for non-cash or non-recurring items, and other adjustments permitted under our credit agreement. We define Adjusted Free Cash Flow as net cash flows provided by (used in) operating activities, the most directly comparable GAAP measure, less capital expenditures, cash interest and cash taxes.

We consistently calculate these non-GAAP measures using the same methodology each period. Management uses these measures as internal performance metrics to evaluate results at the consolidated level, to plan and forecast performance, to allocate capital, and in connection with performance incentive plans. The Board of Directors and management also use Adjusted EBITDA as one of the primary tools for assessing operating performance and determining capital allocation. We believe that Adjusted Free Cash Flow provides useful additional information about liquidity, including cash available for debt service, working capital requirements, and strategic investments.

We encourage investors to review our consolidated financial statements included elsewhere in this Form 10-K. Reconciliations of Adjusted Net Income (Loss) to net income (loss), Adjusted EBITDA to net income (loss), and Adjusted Free Cash flow to cash flow from operating activities, the most directly comparable financial measure presented in accordance with GAAP, set forth in the tables below. All of the items included in the reconciliations below are either (i) non-cash items or (ii) items that management does not consider in assessing our on-going operating performance.

These non-GAAP financial measures are not intended as substitutes for and should not be considered superior to measures of financial performance prepared in accordance with GAAP. In addition, our definitions of these non-GAAP financial measures may differ from those used by other companies, limiting comparability.

For a discussion regarding the seasonality of our business, see Management's Discussion and Analysis - Seasonality discussion above.

45

Index to Form 10-K Index to FS

Adjusted Net Income (Loss)

[[GREPCENT_TABLE]]
[["","","","","","52 weeks ended","","53 weeks ended"],["Dollars in thousands","","","","","May 2, 2026","","May 3, 2025"],["Net Income (loss)","","","","","$","16,872","","","$","(65,825)"],["Reconciling items","","","","","5,390","","","4,108"],["Adjusted Net income (loss)","","","","","$","22,262","","","$","(61,717)"],["Reconciling items"],["Impairment loss (b)","","","","","$","12,584","","","$","1,713"],["Stock-based compensation expense","","","","","6,214","","","5,386"],["Other (income) expense, net"],["Participation interest purchase agreement settlement","","","","","(12,625)","","","\u2014"],["Severance and cost reduction initiatives","","","","","\u2014","","","4,058"],["Legal settlement and related legal fees","","","","","\u2014","","","1,059"],["Settlement of obligations and actuarial gain related to frozen retirement plan","","","","","\u2014","","","(8,780)"],["Other professional services fees","","","","","1,048","","","2,091"],["Estimated tax effect on reconciling items above (a)","","","","","(1,831)","","","(1,419)"],["Reconciling items","","","","","$","5,390","","","$","4,108"]]
[[/GREPCENT_TABLE]]

(a)The tax effect on reconciling items was calculated for Fiscal 2026 using the statutory rate of 25.36%. The tax effect on reconciling items was calculated for Fiscal 2025 using the statutory rate of 25.67%.

Adjusted EBITDA

[[GREPCENT_TABLE]]
[["","","52 weeks ended","","53 weeks ended"],["Dollars in thousands","","May 2, 2026","","May 3, 2025"],["Net income (loss)","","$","16,872","","","$","(65,825)"],["Add:"],["Depreciation and amortization expense","","32,754","","","37,939"],["Interest expense, net","","15,866","","","22,260"],["Income tax expense","","3,800","","","4,256"],["Impairment loss (a)","","12,584","","","1,713"],["\u200b"],["Loss on extinguishment of debt","","\u2014","","","55,233"],["Other (income) expense, net (a) (b)","","(11,577)","","","(1,572)"],["Stock-based compensation expense","","6,214","","","5,386"],["Adjusted EBITDA","","$","76,513","","","$","59,390"]]
[[/GREPCENT_TABLE]]

(a)See Management's Discussion and Analysis - Results of Operations.

(b)Other (income) expense is exclusive of Investigation costs of $7.3 million incurred during the 52 weeks ended May 2, 2026.

Adjusted Free Cash Flow

[[GREPCENT_TABLE]]
[["","","52 weeks ended","","53 weeks ended"],["Dollars in thousands","","May 2, 2026","","May 3, 2025"],["Net cash flows provided by (used in) operating activities (a)","","$","50,057","","","$","(85,413)"],["Less:"],["Capital expenditures (b)","","16,196","","","12,894"],["Cash interest","","12,531","","","17,912"],["Cash taxes (refund) paid, net","","7,917","","","2,130"],["Adjusted Free Cash Flow","","$","13,413","","","$","(118,349)"]]
[[/GREPCENT_TABLE]]

(a)    See Liquidity and Capital Resources - Sources and Uses of Cash Flow discussion below.

46

Index to Form 10-K Index to FS

Given the growth of our BNC First Day® programs, the timing of cash collection from our school partners may shift to periods subsequent to when the revenue is recognized. When a school adopts our BNC First Day® affordable access course material program offerings, cash collection from the school generally occurs after the institution's drop/add dates, which is later in the working capital cycle, particularly in our third quarter given the timing of the Spring Term and our quarterly reporting period, as compared to direct-to-student point-of-sale transactions where cash is generally collected during the point-of-sale transaction or within a few days from the credit card processor. As a higher percentage of our sales shift to BNC First Day® affordable access course material program offerings, we are focused on efforts to better align the timing of our cash outflows to course material vendors and cash inflows from collections from schools.

(b)    Purchases of property and equipment are also referred to as capital expenditures. Our investing activities consist principally of capital expenditures for contractual capital investments associated with renewing existing contracts, new store construction, and enhancements to internal systems and our website. The following table provides the components of total purchases of property and equipment:

Capital Expenditures

[[GREPCENT_TABLE]]
[["","","52 weeks ended","","53 weeks ended"],["Dollars in thousands","","May 2, 2026","","May 3, 2025"],["Physical store capital expenditures","","$","10,527","","","$","8,866"],["Product and system development","","4,597","","","3,063"],["Other","","1,072","","","965"],["Total Capital Expenditures","","$","16,196","","","$","12,894"]]
[[/GREPCENT_TABLE]]

Liquidity and Capital Resources

During Fiscal 2026, our primary sources of cash are net cash flows from operating activities, funds available under our Credit Agreement, and short-term vendor financing. Our liquidity is highly dependent on the seasonal nature of our business, particularly with respect to course material sales, as sales are generally highest in the second and third fiscal quarters, when college students purchase textbooks for the upcoming Fall and Spring semesters, respectively. As of May 2, 2026, we had $8.4 million of cash on hand and $19.8 million of restricted cash including $17.4 million related to segregated funds for commission due to Lids for logo merchandise sales as per the F/L Relationship-related agreements and $2.4 million related amounts held in trust for future distributions related to employee benefit plans.

On June 10, 2024, we completed the Transactions, including the Rights Offering, the Private Investment, the Term Loan Debt Conversion, and the Credit Facility Refinancing, to substantially deleverage our Consolidated Balance Sheet. These transactions also raised additional capital for repayment of indebtedness and provide additional flexibility for future working capital needs. For additional information, see Financing Arrangements. Additionally, on September 19, 2024 and December 20, 2024, respectively, we entered into an at-the market ("ATM") sales agreement with BTIG, LLC ("BTIG") under which we sold our Common Stock from time to time through BTIG as the sales agent (See Note 6. Equity).

We believe that our future cash from operations, access to borrowings under the credit facility, and short-term vendor financing will provide adequate resources to fund our operating and financing needs for the next twelve months and beyond. To the extent that available funds are insufficient to fund our future activities, we may need to raise additional funds through public or private financing of debt or equity. Our access to, and the availability of, financing in the future will be impacted by many factors, including the liquidity of the overall capital markets and the current state of the economy. There can be no assurances that we will have access to capital markets on acceptable terms.

Sources and Uses of Cash Flow

[[GREPCENT_TABLE]]
[["","","52 weeks ended","","53 weeks ended"],["Dollars in thousands","","May 2, 2026","","May 3, 2025"],["Net cash flows provided by (used in) operating activities","","$","50,057","","","$","(85,413)"],["Net cash flows used in investing activities","","(16,196)","","","(12,101)"],["Net cash flows (used in) provided by financing activities","","(34,365)","","","97,667"],["Net change in cash, cash equivalents, and restricted cash","","$","(504)","","","$","153"]]
[[/GREPCENT_TABLE]]

As of May 2, 2026, and May 3, 2025, we had cash of $8.4 million and $9.1 million, respectively. As of May 2, 2026 and May 3, 2025, we had restricted cash of $19.8 million and $19.7 million, respectively, comprised of $17.4 million and $17.3 million, respectively, in prepaid and other current assets in the Consolidated Balance Sheets primarily related to segregated funds for commission due to Lids for logo merchandise sales as per the Lids service provider merchandising agreement and

47

Index to Form 10-K Index to FS

$2.4 million and $2.3 million, respectively, in other noncurrent assets in the Consolidated Balance Sheets related to amounts held in trust for future distributions related to employee benefit plans.

Cash Flow from Operating Activities

Our business is highly seasonal. Cash flows from operating activities are typically a source of cash in the second and third fiscal quarters, when students generally purchase and rent textbooks and other course materials for the upcoming semesters based on the typical academic semester. Given the growth of our BNC First Day® programs, the timing of cash collection from our school partners may shift to periods subsequent to when the revenue is recognized. When a school adopts our BNC First Day® affordable access course material program offerings, cash collection from the school generally occurs after the institution's drop/add dates, which is later in the working capital cycle, particularly in our third quarter given the timing of the Spring Term and our quarterly reporting period, as compared to direct-to-student point-of-sale transactions where cash is generally collected during the point-of-sale transaction or within a few days from the credit card processor. As a higher percentage of our sales shift to BNC First Day® affordable access course material program offerings, we are focused on efforts to better align the timing of our cash outflows to course material vendors and cash inflows from collections from schools. Our quarterly cash flows also may fluctuate depending on the timing of the start of the various schools' semesters, as well as shifts in our fiscal calendar dates. These shifts in timing may affect the comparability of our results across periods.

Net cash provided by operating activities during the 52 weeks ended May 2, 2026, was $50.1 million compared with net cash used in operating activities of $85.4 million during the 53 weeks ended May 3, 2025. The $135.5 million improvement in operating cash flows was primarily driven by favorable changes in working capital and improved operating performance, including a $184.0 million favorable change in accounts payable and accrued liabilities, primarily reflecting the timing of payments to vendors for inventory purchases and operating expenses, as well as an $82.7 million improvement in earnings. These favorable impacts were partially offset by $(19.2) million unfavorable change in accounts receivable and a $(43.3) million reduction in the cash flow benefit associated with merchandise inventory balances compared with the prior year.

Cash Flow from Investing Activities

Net cash used in investing activities during the 52 weeks ended May 2, 2026, was $16.2 million compared to $12.1 million during the 53 weeks ended May 3, 2025. The increase in cash used was primarily attributable to higher capital expenditures, reflecting continued investments in technology, store operations and strategic initiatives.

Cash Flow from Financing Activities

Net cash used in financing activities during the 52 weeks ended May 2, 2026, was $(34.4) million compared to net cash provided by financing activities of $97.7 million during the 53 weeks ended May 3, 2025. The net change of $(132.0) million was primarily due to the absence of significant equity financing transactions completed during fiscal 2025, including $50.0 million private equity investment led by Immersion Corporation, and a $45.0 million fully backstopped Rights Offering, and proceeds of $78.5 million proceeds from the Company's at-the-market equity program. In addition, borrowings under the Company's credit facilities were lower in fiscal 2026, resulting in net repayment of debt of $29.8 million.

Financing Arrangements

[[GREPCENT_TABLE]]
[["Dollars in thousands","","","As of"],["","Maturity Date (a)","","May 2, 2026","","May 3, 2025"],["Credit Facility","June 9, 2028","","$","71,000","","","$","103,100"],["Total debt","","","$","71,000","","","$","103,100"],["Balance Sheet classification:"],["Long-term borrowings","","","$","71,000","","","$","103,100"]]
[[/GREPCENT_TABLE]]

(a)    On June 10, 2024, we completed the Transactions, including amending and extending the maturity date of the Credit Facility to June 9, 2028 and converting all outstanding principal and interest amounts owed under our Term Loan Credit Agreement into shares of our Common Stock. For additional information, see Note 10. Debt.

48

Index to Form 10-K Index to FS

June 2024 Equity and Debt Transactions

On June 10, 2024, we completed the Transactions, including the Rights Offering, the Private Investment, the Term Loan Debt Conversion, and the Credit Facility Refinancing, to substantially deleverage our Consolidated Balance Sheet. These transactions raised additional capital for repayment of indebtedness and provide additional flexibility for working capital needs, which will also allow us to strategically invest in innovation and continue to execute our strategic initiatives, including but not limited to the growth of our First Day Complete program. For additional information, see Part II - Item 8. Financial Statements and Supplementary Data.

Credit Facility

We are a party to that certain Credit Agreement, dated as of August 3, 2015, by and among the Company, as borrower, the lenders party thereto, Bank of America, N.A., as administrative agent, and the other agents party thereto (the “Original Credit Agreement”), which was amended from time to time (as amended, the “Credit Agreement”). On June 10, 2024 (the “Closing Date”), we amended and restated the Credit Agreement, and through such amendment and restatement, further extended the maturity of our asset-based credit facility under the Credit Agreement (such amended and restated Credit Agreement, the “A&R Credit Agreement”).

Pursuant to the A&R Credit Agreement, the lenders have committed to provide a four-year asset-based revolving credit facility (the "Credit Facility") in an aggregate committed principal amount of up to $325.0 million, with a maturity date of June 9, 2028. During the 53 weeks ended May 3, 2025, we incurred debt issuance costs totaling $3.7 million related to the A&R Credit Agreement.

In connection with the delayed filing of our 2025 Annual Report and our Quarterly Reports on Form 10-Q for the first and second quarters of Fiscal 2026, we entered into a series of limited consent and waiver agreements with our lenders to extend certain financial reporting deadlines. These waivers related solely to the timing of our filings and did not arise from noncompliance with any financial covenants. Aggregate fees incurred in connection with these waivers totaled approximately $1.0 million, recognized as interest expense during Fiscal 2026.

As of May 2, 2026, and as of the issuance date of this Annual Report on Form 10-K, we were in compliance with all covenants under the A&R Credit Agreement. For information regarding the A&R Credit Agreement terms, deferred financing costs, and covenant requirements, see Part II - Item 8. Financial Statements and Supplementary Data - Note 10, Debt.

As of both May 2, 2026, and May 3, 2025, we have issued $0.7 million and $0.6 million, respectively, in letters of credit under the Credit Facility.

Term Loan

On June 10, 2024, pursuant to the Term Loan Credit Agreement by and among the Company, TopLids LendCo, LLC and Vital Fundco, LLC dated June 7, 2022 (the "Term Loan"), lenders converted approximately $34.0 million of outstanding principal and accrued and unpaid interest into our Common Stock, resulting in financing noncash flow activity totaling $86.8 million. We recognized a loss on extinguishment of debt of $55.2 million in the Consolidated Statement of Operations in connection with the Term Loan Debt Conversion which represents the difference between the Common Stock fair value issued upon conversion and the net carrying value of the Term Loan, plus unamortized deferred financing costs related to the Term Loan. As a result of the Term Loan Debt Conversion, the Term Loan and its related agreements were terminated. For information regarding the Term Loan amendments, deferred financing costs and terms, see Part II - Item 8. Financial Statements and Supplementary Data - Note 10. Debt.

Deferred Financing Costs

The debt issuance costs have been deferred and are presented as noted below in the Consolidated Balance Sheets and are subsequently amortized ratably over the term of respective debt.

[[GREPCENT_TABLE]]
[["Dollars in thousands","","","As of"],["Balance Sheet Location","Maturity Date/Amortization Term (a)","","May 2, 2026","","May 3, 2025"],["Credit Facility - Other noncurrent assets","June 9, 2028","","$","7,935","","","$","11,597"]]
[[/GREPCENT_TABLE]]

(a)    On June 10, 2024, we completed the Transactions, including amending and extending the maturity date of the Credit Facility, and converting all outstanding principal and interest amounts owed under our Term Loan into shares of our Common Stock. For additional information, see Part II - Item 8. Financial Statements and Supplementary Data.

49

Index to Form 10-K Index to FS

Interest

The following table presents interest expense on the Consolidated Statements of Operations and cash interest paid:

[[GREPCENT_TABLE]]
[["","","52 weeks ended","","53 weeks ended"],["","","May 2, 2026","","May 3, 2025"],["Interest Incurred"],["Credit Facility","","$","12,290","","","$","16,279"],["Term Loan","","\u2014","","","1,167"],["Total Interest Incurred","","$","12,290","","","$","17,446"],["Amortization of Deferred Financing Costs"],["Credit Facility","","$","3,662","","","$","5,014"],["Term Loan","","\u2014","","","150"],["Total Amortization of Deferred Financing Costs","","$","3,662","","","$","5,164"],["Interest Income, net of expense","","$","(86)","","","$","(350)"],["Total Interest Expense","","$","15,866","","","$","22,260"],["Cash Interest Paid","","$","12,531","","","$","17,912"]]
[[/GREPCENT_TABLE]]

Share Repurchases

On December 14, 2015, our Board of Directors authorized a stock repurchase program of up to $50 million, in the aggregate, of our outstanding common stock. The stock repurchase program is carried out at the direction of management (which may include a plan under Rule 10b5-1 of the Securities Exchange Act of 1934). The stock repurchase program may be suspended, terminated, or modified at any time. Any repurchased shares will be held as treasury stock and will be available for general corporate purposes. During Fiscal 2026 and Fiscal 2025, we did not purchase shares under the stock repurchase program. As of May 2, 2026, approximately $26.7 million remains available under the stock repurchase program.

During Fiscal 2026 and Fiscal 2025, we purchased 93,842 shares and 429 shares, respectively, outside of the stock repurchase program in connection with employee tax withholding obligations for vested stock awards.

Contractual Obligations

The following table sets forth our contractual obligations as of May 2, 2026 (in millions):

[[GREPCENT_TABLE]]
[["","","Payments Due by Period"],["","","Total","","Less Than 1 Year","","1-3 Years","","3-5 Years","","More Than 5 Years"],["New Credit Facility (a)","","$","71.0","","","$","\u2014","","","$","\u2014","","","$","71.0","","","$","\u2014"],["Lease obligations (excluding imputed interest) (b)","","69.6","","","0.1","","","26.5","","","43.0","","","\u2014"],["Purchase obligations (c)","","29.7","","","14.9","","","13.2","","","1.6","","","\u2014"],["Total","","$","170.3","","","$","15.0","","","$","39.7","","","$","115.6","","","$","\u2014"]]
[[/GREPCENT_TABLE]]

(a)On June 10, 2024, we completed the Transactions, including the Rights Offering, the Private Investment, the Term Loan Debt Conversion, and the Credit Facility Refinancing, to substantially deleverage our Consolidated Balance Sheet. These transactions raised additional capital for repayment of indebtedness and provide additional flexibility for working capital needs, which will also allow us to strategically invest in innovation and continue to execute our strategic initiatives, including but not limited to the growth of our First Day Complete program. For additional information, see Part II - Item 8. Financial Statements and Supplementary Data.

(b)Our contracts for physical bookstores with colleges and universities are typically five years with renewal options, but can range from one to 1 5 years, and are typically cancelable by either party without penalty upon advance notice ranging from 90 to 180 days depending on the contract. Annual projections are based on current minimum guarantee amounts. In the less than approximately 40% of our contracts with colleges and universities that include minimum guarantees, the minimum guaranteed amounts typically adjust annually to equal less than the prior year's commission earned. See Part II - Item 8. Financial Statements and Supplementary Data — Note 11. Leases.

(c)Includes information technology contracts.

Certain Relationships and Related Party Transactions

See Part II - Item 8. Financial Statements and Supplementary Data — Note 13. Related Party Transactions.

50

Index to Form 10-K Index to FS

Critical Accounting Policies and Estimates

In preparing our consolidated financial statements in accordance with GAAP, we are required to use judgment in making estimates and assumptions that affect the amounts reported in our consolidated financial statements and related notes. In preparing these financial statements, management has made its best estimates and judgments with respect to certain amounts included in the financial statements, giving due consideration to materiality. We do not believe there is a great likelihood that materially different amounts would be reported related to the accounting policies described below. However, application of these accounting policies involves the exercise of judgment and use of assumptions as to future uncertainties and, as a result, actual results could differ from these estimates.

Revenue Recognition and Deferred Revenue

Product sales and rentals

The majority of our revenue is derived from the sale of products through our bookstore locations, including virtual bookstores, and our bookstore affiliated e-commerce websites, and contains a single performance obligation. Revenue from sales of our products is recognized at the point in time when control of the products is transferred to our customers in an amount that reflects the consideration we expect to be entitled to in exchange for the products. For additional information, see Part II - Item 8. Financial Statements and Supplementary Data - Note 4. Revenue.

Retail product revenue is recognized when the customer takes physical possession of our products, which occurs either at the point of sale for products purchased at physical locations or upon receipt of our products by our customers for products ordered through our websites and virtual bookstores. Wholesale product revenue is recognized upon shipment of physical textbooks at which point title passes and risk of loss is transferred to the customer. Additional revenue is recognized for shipping charges billed to customers and shipping costs are accounted for as fulfillment costs within cost of goods sold.

Revenue from the sale of digital textbooks, which contains a single performance obligation, is recognized upon the delivery of the digital content as product revenue in our consolidated financial statements. A software feature is embedded within the content of our digital textbooks, such that upon expiration of the term the customer is no longer able to access the content. While the sale of the digital textbook allows the customer to access digital content for a fixed period of time, once the digital content is delivered to the customer, our performance obligation is complete.

Revenue from the rental of physical textbooks is deferred and recognized over the rental period based on the passage of time commencing at the point of sale, when control of the product transfers to the customer and is recognized as rental income in our consolidated financial statements. Rental periods are typically for a single semester and are always less than one year in duration. We offer a buyout option to allow the purchase of a rented physical textbook at the end of the rental period if the customer desires to do so. We record the buyout purchase when the customer exercises and pays the buyout option price which is determined at the time of the buyout. In these instances, we accelerate any remaining deferred rental revenue at the point of sale.

Revenue recognized for our BNC First Day® offerings is consistent with our policies outlined above for product, digital and rental sales, net of an anticipated opt-out or return provision. Given the growth of BNC First Day programs, the timing of cash collection from our school partners may shift to periods subsequent to when the revenue is recognized. When a school adopts our BNC First Day® affordable access course material program offerings, cash collection from the school generally occurs after the institution's drop/add dates, which is later in the working capital cycle, particularly in our third quarter given the timing of the Spring Term and our quarterly reporting period, as compared to direct-to-student point-of-sale transactions where cash is generally collected during the point-of-sale transaction or within a few days from the credit card processor.

We estimate returns based on an analysis of historical experience. A provision for anticipated merchandise returns is provided through a reduction of sales and cost of goods sold in the period that the related sales are recorded.

For sales and rentals involving third-party products, we evaluate whether we are acting as a principal or an agent. Our determination is based on our evaluation of whether we control the specified goods or services prior to transferring them to the customer. There are significant judgments involved in determining whether we control the specified goods or services prior to transferring them to the customer including whether we have the ability to direct the use of the good or service and obtain substantially all of the remaining benefits from the good or service. For those transactions where we are the principal, we record revenue on a gross basis, and for those transactions where we are an agent to a third-party, we record revenue on a net basis.

We recognize revenue commissions from logo general merchandise sales, which are fulfilled by Lids and Fanatics, on a net basis in our consolidated financial statements.

As of Fiscal 2026 year-end, we did not have a customer loyalty program. In the beginning of Fiscal 2027, we launched our own gift card program, and continue to honor Barnes & Noble Booksellers gift cards and sell third-party gift cards in our stores. We do not treat any promotional offers as expenses. Sales tax collected from our customers is excluded from reported revenues. Our payment terms are generally 30 days and do not extend beyond one year.

Service and other revenue

Service and other revenue is primarily derived from brand marketing services which includes promotional activities and advertisements within our physical bookstores and web properties performed on behalf of third-party customers, shipping and handling, non-return rental penalty fees, and revenue from other programs.

Merchandise Inventories

Merchandise inventories, which consist of finished goods, are stated at the lower of cost or market. Market value of our inventory, which is all purchased finished goods, is determined based on its estimated net realizable value, which is generally the selling price less normally predictable costs of disposal and transportation.

Cost is determined primarily by the retail inventory method for our retail business. Our textbook and trade book inventories, for our retail and wholesale businesses, are valued using the LIFO method. In Fiscal 2026, there was no required LIFO adjustment. In Fiscal 2025 we recorded a LIFO adjustment in the amount of $6.4 million.

Reserves for non-returnable inventory represent write-downs that reduce the cost basis of the asset. These write-downs are based on our history of liquidating non-returnable inventory. Reserve calculations are sensitive to certain assumptions, including markdowns and inventory aging. We do not believe there is a reasonable likelihood that there will be a material change in the future estimates or assumptions used to calculate the non-returnable inventory reserve. However, if assumptions based on our history of liquidating non-returnable inventory are incorrect, we may be exposed to losses or gains that could be material. A 10% change in actual non-returnable inventory would have affected pre-tax earnings by approximately $5.2 million in Fiscal 2026.

For our physical bookstores, we also estimate and accrue shortage for the period between the last physical count of inventory and the balance sheet date. Shortage rates are estimated and accrued based on historical rates and can be affected by changes in merchandise mix and changes in actual shortage trends. We do not believe there is a reasonable likelihood that there will be a material change in the future estimates or assumptions used to calculate shortage rates. However, if our estimates regarding shortage rates are incorrect, we may be exposed to losses or gains that could be material. A change of 10 basis points of actual shortage rates would not have a material impact on pre-tax earnings in Fiscal 2026.

Evaluation of Other Long-Lived Assets Impairment

As of May 2, 2026, our other long-lived assets include property and equipment, operating lease right-of-use assets, and amortizable intangibles of $34.1 million, $145.6 million, and $58.1 million, respectively, on our Consolidated Balance Sheet.

We review our long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable and consider market participants in accordance with Accounting Standards Codification (“ASC”) 360-10, Accounting for the Impairment or Disposal of Long-Lived Assets. We evaluate the long-lived assets of the reporting units for impairment at the lowest asset group level for which individual cash flows can be identified. When evaluating long-lived assets for potential impairment, we first compare the carrying amount of the asset group to the estimated future undiscounted cash flows. The impairment loss calculation compares the carrying amount of the assets to the fair value based on estimated discounted future cash flows. If required, an impairment loss is recorded for that portion of the asset’s carrying value in excess of fair value.

During Fiscal 2026, we evaluated certain of our store-level long-lived assets for impairment. Based on the results of the impairment tests, we recognized an impairment loss of $12.6 million (both pre-tax and after-tax), comprised of $2.8 million, $6.0 million, and $3.8 million of property and equipment, operating lease right-of-use assets, and amortizable intangibles, respectively, on the Consolidated Statement of Operations.

During Fiscal 2025, we evaluated certain of our store-level long-lived assets for impairment. Based on the results of the impairment tests, we recognized an impairment loss of $1.7 million (both pre-tax and after-tax), comprised of $0.3 million, $0.3 million, and $1.1 million of property and equipment, operating lease right-of-use assets, and amortizable intangibles, respectively, on the Consolidated Statement of Operations.

The fair value of the impaired long-lived assets was determined using an income approach (Level 3 input), using the Company’s best estimates of the amount and timing of future discounted cash flows, based on historical experience, market conditions, current trends and performance expectations. For additional information, see Part II - Item 8. Financial Statements and Supplementary Data - Note 8. Fair Value Measurements.

The impairment analysis process requires significant estimation to determine recoverability of each asset group and to determine the fair value of asset groups that were not recoverable, as well as the fair values of certain operating right-of-use assets included within the asset groups that were not recoverable. The significant assumptions used included annual revenue growth rates, gross margin rates and the estimated relationship of selling and administrative costs to revenue used to estimate the projected cash-flow directly related to the future operation of the stores as well as the weighted average cost of capital used to calculate the fair value. Significant assumptions used to determine the fair values of certain operating right-of-use assets

included the current market rent and discount rate. These assumptions are subjective in nature and are affected by expectations about future market or economic conditions.

We do not believe there is a reasonable likelihood that there will be a material change in the estimates or assumptions used to calculate long-lived asset impairment losses. However, if actual results are not consistent with estimates and assumptions used in estimating future cash flows and asset fair values, we may be exposed to losses that could be material. A 10% decrease in our estimated discounted cash flows would not have materially affected the results of our operations in Fiscal 2026.

Income Taxes

Deferred income tax balances reflect the effects of temporary differences between the carrying amounts of assets and liabilities and their tax basis and are stated at enacted tax rates expected to be in effect when taxes are actually paid or recovered. Financial Accounting Standards Board (FASB) guidance on accounting for income taxes requires that deferred tax assets be evaluated for future realization and reduced by a valuation allowance to the extent we believe a portion will not be realized. We consider many factors when assessing the likelihood of future realization of our deferred tax assets, including our recent earnings experience and expectations of future taxable income by taxing jurisdiction, the carryforward periods available to us for tax reporting purposes and other relevant factors. The actual realization of deferred tax assets may differ significantly from the amounts we have recorded.

Recent Accounting Pronouncements

See Part II - Item 8. Financial Statements and Supplementary Data - Note 2. Summary of Significant Accounting Policies - Recent Accounting Pronouncements for information related to new accounting pronouncements.