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Shares of Barnes & Noble Education (NYSE:BNED) cratered in late trading Friday after the company disclosed that the annual report for the fiscal year ended May 3, 2025, will be delayed due to an ongoing investigation regarding how the cost of digital sales were recorded.
The matter was brought to the attention of management in July, at which time the audit committee of the Board of Directors initiated an internal investigation.
Early findings indicate the company may have overstated accounts receivable by up to $23M, which will impact operations for the period ended May 3, 2025. Total sales are not expected to have been impacted.
While it is unlikely the error will result in the restatement of previously issued financial statements, the company is looking into internal controls over financial reporting and expects to report at least one material weakness tied to manual journal entries.
This “material weakness” will likely lead to the conclusion that Barnes & Noble’s (NYSE:BNED) internal control over financial reporting was not effective, and disclosure controls and procedures were not effective during the fiscal years ended May 3 and April 27, 2024.
Shares fell as much as 15% in after-hours trading.