While Barnes & Noble suffered a 6.2% decline in sales to $1.63 billion for the quarter ended Jan. 31, the chain was still able to generate $81.2 million in net income, which translates into $1.46 per diluted share. That compares with the $115 million, or $1.79 per diluted share, the company posted in the corresponding quarter last year when sales were $1.74 billion.

For the full year ended Jan. 31, the company, posted net income of $75.9 million, or $1.32 per diluted share, on revenues of $5.1 billion, but that includes two charges that impacted earnings by 21 cents. That's down from the $135.8 million in net income, or $2.03 per diluted share, the company garnered in the prior year, when sales were $5.3 billion.

"Despite a sales decrease of 3%, gross margins improved by 50 basis points, inventory levels were reduced by 11%, and our focus on expense control and capital expenditures enabled us to generate operating free cash flow of $150 million, exceeding our expectations, Barnes & Noble CEO Steve Riggio said in a statement. "As we look to 2009, we expect the challenging environment to continue. Sales forecasts have been planned accordingly and expenses have been cut. The strength of our balance sheet remains a top priority."

As of January 31, 2009, the company operated 726 Barnes & Noble stores and 52 B. Dalton stores. During the fourth quarter, five Barnes & Noble stores were opened and seven were closed, while 19 B. Dalton stores were shuttered. Going forward, the company said it expects first quarter comparable store sales at Barnes & Noble stores to decrease in a range of 6% to 9%, and full-year comparable store sales to decrease in a range of 4% to 6%. It also said a first quarter loss is expected to range from $0.10 to $0.20 per share, while full-year earnings per share are expected to range from $0.95 to $1.25.

At mid-day, Barnes & Nobles share traded up to $22.74 from the previous day close of $21.01 on news of the financial results.