Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995

This document contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, as amended, that involve a number of risks and uncertainties. A number of factors could cause our actual results, performance, achievements or industry results to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. These factors include, but are not limited to, the competitive environment in the book retail industry in general and in our specific market areas; inflation or deflation; economic conditions in general and in our specific market areas, including the length of time that the U.S. economy remains in the current recession; the number of store openings and closings; the profitability of certain product lines;capital expenditures; future liquidity; liability and other claims asserted against us; uncertainties related to the Internet and our Internet operations; and other factors referenced herein and in Part I, Item 1A, RISK FACTORS, of our Annual Report on Form 10-K for the fiscal year ended January 31, 2009. In addition, such forward-looking statements are necessarily dependent upon assumptions, estimates and dates that may be incorrect or imprecise and involve known and unknown risks, uncertainties and other factors. Accordingly, any forward-looking statements included herein do not purport to be predictions of future events or circumstances and may not be realized. Given these uncertainties, stockholders and prospective investors are cautioned not to place undue reliance on such forward-looking statements. We disclaim any obligations to update any such factors or to publicly announce the results of any revisions to any of the forward-looking statements contained herein to reflect future events or developments.

We were founded in 1917 and currently operate 223 retail bookstores, including 203 superstores, concentrated in the southeastern United States.

Our growth strategy is focused on opening superstores in new and existing market areas, particularly in the Southeast. In addition to opening new stores, management intends to continue its practice of reviewing the profitability trends and prospects of existing stores and closing or relocating under-performing stores or converting stores to different formats.

Comparable store sales are determined each fiscal quarter during the year based on all stores that have been open at least 12 full months as of the first day of the fiscal quarter. Any stores closed during a fiscal quarter are excluded from comparable store sales as of the first day of the quarter in which they close. Remodeled and relocated stores are also included as comparable stores. The factors affecting the future trend of comparable store sales include, among others, overall demand for products the Company sells, the Company's marketing programs, pricing strategies, store operations and competition.

Results of Operations



The following table sets forth statement of income data expressed as a
percentage of net sales for the periods presented.



                               Thirteen Weeks Ended            Twenty-Six Weeks Ended
                           August 1, 2009 August 2, 2008    August 1, 2009 August 2, 2008
Net sales                      100.0%         100.0%            100.0%         100.0%
Gross profit                   29.5%          28.8%             29.6%          29.3%
Operating, selling and
administrative expenses        24.5%          24.6%             24.1%          24.8%
Depreciation and                2.9%           2.9%              3.0%           3.0%
amortization
Operating income                2.1%           1.3%              2.5%           1.5%
Interest expense, net           0.1%           0.4%              0.1%           0.4%
Income from continuing          2.0%           0.9%              2.4%           1.1%
operations
before income taxes
Income tax provision            0.8%           0.4%              0.9%           0.5%
Net income                      1.2%           0.5%              1.5%           0.6%

The following table sets forth net sales data by segment for the periods presented:

Segment Information (dollars in thousands)

Net Sales                 Thirteen Weeks Ended                               Twenty-Six Weeks Ended

             August 1, 2009 August 2, 2008 $ Change % Change    August 1, 2009 August 2, 2008 $ Change  % Change
Retail Trade    $120,928       $121,545      $(617)   (1.0%)       $238,164      $236,565        $1,599     1.0%
Electronic
Commerce
Trade              5,348          6,097       (749)  (12.3%)         10,866        12,423       (1,557)   (12.5%)
Intersegment
Sales
Elimination         (3,833)        (4,389)      556    12.7%           (8,418)        (9,818)     1,400     14.3%
Net Sales       $122,443       $123,253      $(810)   (1.0%)       $240,612       $239,170      $1,442       1.0%

Gross profit increased $0.5 million, or 1.6%, to $36.1 million in the thirteen weeks ended August 1, 2009, when compared with $35.5 million in the same thirteen week period for the prior year. For the twenty-six weeks ended August 1, 2009, gross profit increased $1.5 million, or 2.2%, to $71.4 million from $69.9 million in the prior year period. Gross profit as a percentage of net sales for the thirteen weeks ended August 1, 2009 and August 2, 2008 was 29.5% and 28.8%, respectively. Gross profit as a percentage of net sales for the twenty-six weeks ended August 1, 2009 and August 2, 2008 was 29.6% and 29.3%, respectively. The increase in gross profit as a percentage of net sales for the twenty-six week period ended August 1, 2009 was the result of lower discounts and increased sales of higher margin bargain books and general merchandise partially offset by higher costs associated with inventory shrinkage, occupancy and warehouse operations. Occupancy costs have increased due to the significant number of new stores opened since August 2, 2008. Costs associated with the warehouse operations have increased due to higher health insurance costs and taxes.

Operating, selling and administrative expenses were $29.9 million in the thirteen weeks ended August 1, 2009, compared to $30.3 million in the same period last year. Operating, selling and administrative expenses as a percentage of net sales for the thirteen weeks ended August 1, 2009 decreased to 24.5% from 24.6% in the same period last year. The decrease in operating, selling and administrative expenses as a percentage of net sales for the thirteen-week period ended August 1, 2009 was due to cost control measures and reduced expenses for new stores that were partially offset by higher healthcare costs, a noncash impairment charge for underperforming stores and higher store salaries. Our cost cutting efforts were broad in scope and reached virtually every part of the business. New store expense was reduced because of the reduction in new stores opened in the thirteen weeks ended August 1, 2009 compared to the same period last year. There were 223 stores as of August 1, 2009 compared to 212 as of August 2, 2008 with only three stores opened in the twenty-six weeks ended August 1, 2009 compared to seven stores that were opened in the twenty-six weeks ended August 2, 2008. Noncash impairment charges increased $0.4 million ($0.2 million net of tax) for the thirteen week period ended August 1, 2009 compared to the same period last year. The impairment charges were recorded on leasehold improvements at various stores. For the twenty-six weeks ended August 1, 2009, operating, selling and administrative expenses were $58.1 million, compared to $59.2 million in the prior year period. Operating, selling and administrative expenses as a percentage of net sales for the twenty six weeks ended August 1, 2009 decreased to 24.1% from 24.8% from the same period last year. The decrease in operating, selling and administrative expenses as a percentage of net sales for the twenty-six week period ended August 1, 2009 was also due to cost control measures and reduced expenses for new stores that were partially offset by higher healthcare costs, a noncash impairment charge for underperforming stores and higher store salaries.

Depreciation and amortization was essentially flat in the thirteen week period ended August 1, 2009, compared to $3.6 million in the same period last year. The impact of the stores opened in prior periods was offset by assets that became fully depreciated. Depreciation and amortization expense as a percentage of net sales for the thirteen weeks ended August 1, 2009 was 2.9%, which is flat compared to the same period last year. In the twenty-six week period ended August 1, 2009, depreciation and amortization expense increased 1.7% to $7.2 million from $7.1 million in the same period last year. Depreciation and amortization expense as a percentage of net sales for the twenty-six weeks ended August 1, 2009 was 3.0%, which is flat compared to the same period last year.

Segment Information (dollars in thousands)

Operating Income               Thirteen Weeks Ended                               Twenty-Six Weeks Ended

                 August 1, 2009 August 2, 2008 $ Change  % Change    August 1, 2009 August 2, 2008  $ Change  % Change
Retail Trade         $2,612         $1,500        $1,112    74.1%        $6,177         $3,402        $2,775     81.6%
Electronic
Commerce
Trade                  176            240           (64)  (26.7%)          380            566           (186)  (32.9%)
Intersegment
Elimination of
Certain Costs             (181)          (160)      (21)  (13.1%)             (424)          (371)       (53)  (14.3%)
Total Operating
Income               $2,607         $1,580        $1,027    65.0%        $6,133         $3,597         $2,536    71.0%

The increase in operating income for the retail segment for the thirteen week period ended August 1, 2009 was due to cost cutting efforts, reduced new store expense and higher gross margin partially offset by higher costs associated with inventory shrinkage, healthcare expense and the noncash impairment charge as discussed above versus the same thirteen week period in the prior year. The increase in operating income for the retail trade segment for the twenty-six week period ended August 1, 2009 was primarily due to higher retail sales, higher gross margin and reduced new store expense offset by higher costs for inventory shrinkage, healthcare costs and the noncash impairment charge.

Net interest expense was $0.1 million, or 0.1% as a percentage of net sales, for the thirteen weeks ended August 1, 2009, compared to $0.5 million, or 0.4% of net sales, in the same period last year and was $0.3 million in the twenty-six weeks ended August 1, 2009 versus $1.0 million in the same period in the prior year. The decrease in net interest expense was due to a lesser amount of debt and lower interest rates.

The Company did not close any stores during the twenty-six weeks ended August 1, 2009 or the twenty-six weeks ended August 2, 2008 in a market where the Company does not expect to retain the closed stores' customers at another store in the same market.

Liquidity and Capital Resources

Our primary sources of liquidity are cash flows from operations, including credit terms from vendors, and borrowings under our credit facility. We have an unsecured revolving credit facility that allows borrowings of up to $100 million, for which no principal repayments are due until the facility expires in July 2011. Availability under the credit facility is reduced by outstanding letters of credit issued thereunder. The credit facility has certain financial and non-financial covenants, the most restrictive of which is the maintenance of a minimum fixed charge coverage ratio. We were in compliance with all of the covenants, including the minimum fixed charge coverage ratio, as of August 1, 2009. As of August 1, 2009 and January 31, 2009 there were outstanding borrowings under this credit facility of $7.7 million and $15.8, respectively, and the face amount of letters of credit issued under the credit facility was $2.2 million on each such date. The maximum and average outstanding balances (including letters of credit issued thereunder) during the thirteen weeks ended August 1, 2009 were $20.6 million and $14.4 million, respectively, compared to $53.9 million and $43.1 million, respectively, for the same period in the prior year. The maximum and average outstanding balances (including letters of credit issued thereunder) during the twenty-six weeks ended August 1, 2009 were $29.6 million and $17.4 million, respectively, compared to $53.9 million and $41.8 million, respectively for the same period in the prior year. The decrease in the maximum and average outstanding balances from the prior year was due to improved profitability, a decrease in inventory and improved accounts payable leverage.

During fiscal 1995 and fiscal 1996, the Company acquired and constructed certain warehouse and distribution facilities with the proceeds of loans made pursuant to an industrial development revenue bond (the "Bond"), which was secured by a mortgage interest in these facilities. As of August 1, 2009 and January 31, 2009, there was $6.7 million of borrowings outstanding under the Bond, which bears interest at variable rates (1.38% as of August 1, 2009). The Bond has a maturity date of December 1, 2019, but also has a purchase provision obligating the Company to repurchase the Bond at an earlier date under certain circumstances. In fiscal 2007, the current bondholder extended the date of the Company's purchase obligation of the Bond until July 1, 2011 and did not require a mortgage interest to secure the Bond. This extension may be renewed annually by the bondholder, at the Company's request, to a date no more than five years from the renewal date.

Inventory balances were $204.7 million as of August 1, 2009, compared to $204.3 million as of January 31, 2009. The inventory increase was primarily due to seasonal fluctuations in inventory. Inventory levels are generally the lowest at the end of the fiscal year due to holiday sales and large post holiday returns to vendors. Trade accounts payable balances and related party accounts payable were $99.2 million in the aggregate as of August 1, 2009, compared to $96.7 million as of January 31, 2009. The increase in accounts payable was due to the increase in inventory and an increase in accounts payable leverage. Accrued expenses were $35.8 million as of August 1, 2009, compared to $35.6 million as of January 31, 2009. The increase in accrued expenses was due to increased deferrals of club card revenue, increased health care accruals, increased capital expenditure accruals and increased taxes partially offset by the redemption of gift cards, reduction of annual restricted stock and bonus accruals for employees who resigned or were terminated and the timing of other payments.

Future Commitments

The following table lists the aggregate maturities of various classes of obligations and expiration amounts of various classes of commitments related to the Company at August 1, 2009 (in thousands):

Payments Due Under Contractual

Obligations
                  Total     FY 2010   FY 2011   FY 2012   FY 2013   FY 2014  Thereafter
Short-term
borrowings          $7,680    $7,680      $ --      $ --      $ --      $ --       $ --
Long-term debt
-
industrial
revenue bond         6,720        --     6,720        --        --        --         --
Subtotal of         14,400     7,680     6,720        --        --        --         --
debt
Interest               722       292       200       230
Operating          198,669    40,267    34,797    27,916    22,716    18,661     54,312
leases
Total of          $213,791   $48,239   $41,717   $28,146   $22,716   $18,661    $54,312
obligations

(1) Short term borrowings represent borrowings under the $100 million credit facility that the Company anticipates repaying within the next 12 months.

(2) This table excludes any amounts related to the payment of the $2.1 million of income tax uncertainties, as the Company cannot make a reasonably reliable estimate of the periods of cash settlements with the respective taxing authorities.

Guarantees

From time to time, we enter into certain types of agreements that require us to indemnify parties against third-party claims. Generally, these agreements relate to: (a) agreements with vendors and suppliers, under which we may provide customary indemnification to our vendors and suppliers in respect of actions they take at our request or otherwise on our behalf, (b) agreements with vendors who publish books or manufacture merchandise specifically for us to indemnify the vendors against trademark and copyright infringement claims concerning the books published or merchandise manufactured on our behalf, (c) real estate leases, under which we may agree to indemnify the lessors for claims arising from our use of the property, and (d) agreements with our directors, officers and employees, under which we may agree to indemnify such persons for liabilities arising out of their relationship with us. We maintain a Directors and Officers Liability Insurance Policy, which, subject to the policy's conditions, provides coverage for indemnification amounts payable by us with respect to our directors and officers up to specified limits and subject to certain deductibles.

The nature and terms of these types of indemnities vary. The events or circumstances that would require the Company to perform under these indemnities are transaction and circumstance specific. The overall maximum amount of obligations cannot be reasonably estimated. Historically, the Company has not incurred significant costs related to performance under these types of indemnities. No liabilities have been recorded for these obligations on the Company's balance sheet at August 1, 2009 or January 31, 2009, as such liabilities are considered de minimis.

Cash Flows

Operating activities provided cash of $14.4 million in the twenty-six week period ended August 1, 2009 and used cash of $3.4 million in the twenty-six week period ended August 2, 2008, and included the following effects:

• Cash used by inventories in the twenty-six week period ended August 1, 2009 and August 2, 2008 was $0.4 million and $8.7 million, respectively. The change versus the prior year was primarily due to lower purchases of inventory.

• Cash provided by (used for) accounts payable in the twenty-six week period ended August 1, 2009 and August 2, 2008 was $3.6 million and $(5.6) million, respectively.

• Depreciation and amortization expenses were consistent at $7.2 million and $7.1 million in the twenty-six week periods ended August 1, 2009 and August 2, 2008, respectively.

Cash used in investing activities reflected a $4.3 million and $10.8 million net use of cash for the twenty-six week periods ended August 1, 2009 and August 2, 2008, respectively. Cash was used primarily to fund capital expenditures for new stores, store relocations, renovation and improvements to existing stores, and investments in management information systems.

Financing activities used cash of $10.1 million in the twenty-six week period ended August 1, 2009 and provided cash of $14.8 million in the twenty-six week period ended August 2, 2008. Financing activities used cash in the twenty-six week period ended August 1, 2009 primarily for net repayments under our credit facility ($8.1 million), the purchase of treasury stock ($0.5 million) and dividend payments ($1.6 million).

Related Party Activities

See Note 3, Related Party Transactions, to the Condensed Consolidated Financial Statements for information regarding related party activities.

Critical Accounting Policies

A summary of our critical accounting policies is included in the Management's Discussion and Analysis section of our Form 10-K for the year ended January 31, 2009 filed with the Securities and Exchange Commission. No changes to these policies have occurred during the twenty-six weeks ended August 1, 2009.

New Accounting Pronouncements

See Note 8, Recent Accounting Pronouncements, to the Condensed Consolidated Financial Statements for information regarding new accounting pronouncements.