In a disclosure made to the Security and Exchange Commission July 18, Barnes & Noble Education reported that due to issues surrounding the way it accounts for the cost of digital sales, it is delaying the release of several financial reports tied to the fiscal year that ended May 3, 2025. Public companies are typically required to file their annual and 10-K reports within 90 days after the end of the year.
According to the company, questions surrounding the way it records the cost of digital sales was brought to the attention of management earlier this month, who then referred the matter to the audit committee of its board, which has begun an internal investigation with the help of outside counsel and advisors.
According to the filing, initial findings suggest that B&NE may have a potential overstatement of up to $23 million to its accounts receivable balance as of May 3, 2025 due to erroneous reporting during fiscal 2024 and 2025. Based on results of the investigation to date, B&NE wrote that it believes the mistakes were the results of actions taken by a payment processing employee who has been suspended pending the results of the investigation.
In addition to the questions surrounding the reporting on digital sales, B&NE reported that it has begun looking into the accuracy of certain other financial reporting processes. As a result, B&NE said it “expects to report at least one material weakness related to the appropriate review and approval of manual journal entries,” and added that it believes “that its internal control over financial reporting was not effective” in fiscal 2024 and 2025.
The news of the reporting problems taints what appears to have been a relatively good year for the company. Its SEC filing noted that B&NE does not expect the investigation to impact total sales, which it reported rose by $40.5 million in fiscal year 2025 to $1.61 billion, and also does not impact the revenue generated by its inclusive access program, BNC First Day, where sales jumped 25%, to $593.8 million.
The investigation did prevent B&NE from releasing information on its bottomline, but the company did say it was able to cuts it debt by $91.8 million in the year to $94 million at the end of fiscal 2025. B&NE also said expects to be in compliance with its financial covenants under its credit agreement for fiscal 2025. Through the first nine months of fiscal 2025, B&NE reported flat sales, a higher net loss, but also an increase in EBITDA.
B&NE hopes to be able to file its 10-K within the next few weeks, depending “on the progress of and ultimate conclusion of the investigation.”
In early trading, B&NE's stock price was down about 10% from Friday and finished the day with its price declining 22%.
This story as been updated.
