WH Smith Chief Executive Steps Down Following Major Accounting Failure
The chief executive of British retail giant WH Smith has resigned with immediate effect after a significant accounting failure forced the company to dramatically cut its profit forecasts.
Carl Cowling, who had led the company for six years and presided over the sale of its UK high street business earlier this year, offered his resignation following an independent review into an earnings overstatement first revealed in August.
Accounting Blunder Wipes Millions from Profits
An investigation by experts from Deloitte discovered that WH Smith's North America division – identified as the company's key growth area – had been incorrectly recognising supplier income.
The review identified weaknesses in the composition of the North America finance team, along with insufficient systems, controls and review procedures.
As a direct result of these accounting errors, the company now expects group headline trading profit for its financial year to be between £100 million and £110 million – representing a nearly 55% decrease compared to the previous 12 months.
Devastating Impact on North American Operations
The profit forecast for WH Smith's North America division has been particularly hard hit, with expectations now slashed to between £5 million and £15 million.
This represents a dramatic fall from the £55 million profit forecast that had been projected before the accounting irregularities were first identified.
The company's share price has suffered significantly since the issues came to light in August, dropping by almost 50% and wiping approximately £594 million from WH Smith's market value.
Leadership Changes and Rebuilding Trust
Andrew Harrison, currently head of WH Smith's UK division, will step into the role of interim chief executive following Mr Cowling's departure.
In a statement regarding his resignation, Mr Cowling said: "Whilst the issues identified in the Deloitte review arose in our North American division, I recognise the seriousness of this situation and as Group CEO feel it is only right that I step down from my position."
He reflected on his six-year tenure, highlighting his leadership through the pandemic, the development of the company's travel essentials strategy, and the divestment of the High Street and online businesses.
The WH Smith board has stated that its focus is now on rebuilding trust and restoring profitability following this significant setback.
Market Reaction to the Crisis
Dan Coatsworth, head of markets at AJ Bell, commented on the severity of the situation: "No chief executive is going to survive an episode as catastrophic as the one that wiped £594m off the value of WH Smith."
He added that Mr Cowling's credibility had been "shattered by the scale of value destruction" occurring shortly after the strategic sale of the UK high street business, which was meant to represent a defining moment for the company.
WH Smith has issued an apology for the accounting shortcomings and emphasised its commitment to addressing the control failures identified in the Deloitte review.
