WH Smith accounting error update

AN accounting blunder tied to the North American arm triggers profit downgrades and an independent review.

WH Smith reports £30m accounting error as shares slide

WH Smith’s shares fell nearly 40% after the retailer cut its profit forecasts and announced an independent review following a £30m accounting error. The misstatement related to revenue recognition tied to supplier rebates and marketing payments, and it concerned income that should have been logged in the next financial year rather than the year ended 31 August. North America is the focus, with profits for that unit now seen at about £25m, well below prior market expectations of around £55m, contributing to a group pre-tax profit estimate near £110m, versus analysts’ £140m view.

The board has asked Deloitte to conduct an independent and comprehensive review. The North American division has grown under new chief executive Huw Crwys-Williams, but the error has cast a shadow over the expansion. WH Smith operates more than 320 stores in the United States, mainly in airports, and also runs franchises in resorts and through its MRG business. The company’s 2024 deal to sell its UK high street unit has been linked to shifting focus toward travel hubs, a move that made the accounting slip all the more jarring as investors reassess the path forward.

The incident exposes deeper questions about governance, internal controls, and the speed with which a company can pivot away from a declining core. The pivot to North American stores and franchises hinges on careful execution, not accounting discipline. Investors are reassessing risk as the company faces a reputational setback that could influence future funding and partnerships. Deloitte’s review is a crucial step, but trust will take time to rebuild while WH Smith navigates the fallout from this error and the broader challenge of aligning a multinational footprint with a clear, reliable reporting framework.

Beyond the numbers, the episode tests leadership and the appetite for change at a time when market momentum in travel retail can be volatile. The combination of a large one-off error and a strategic refocus can either accelerate reform or deepen scrutiny, depending on how transparently WH Smith communicates findings and actions taken. The next results will show whether this was a stand-alone blip or a signal of wider control weaknesses that need fixing.

Highlights

The path forward will hinge on disclosure, speed, and the credibility of the review process.