WH Smith has been plunged into crisis after a significant accounting failure in its North American operations forced the immediate departure of its chief executive and wiped nearly £600m from the company's market value.
Leadership Fallout and Immediate Consequences
Carl Cowling stepped down as group chief executive with immediate effect after six years in the role. His departure follows an independent investigation by Deloitte that uncovered serious accounting shortcomings in the retailer's North American division.
The review revealed that supplier income had been exaggerated, leading to profits being overstated by as much as £50m in the US business. WH Smith's shares plummeted 42% in a single day when the error first emerged in August, and the company's market value has yet to recover from the nearly £600m wipeout.
Systemic Failures Uncovered
Deloitte's investigation identified multiple weaknesses within the North American operations. The review found inadequate systems, controls, and review procedures for supplier income across both commercial and finance teams.
Additional problems included weaknesses in the composition of the US finance team and limited group oversight of US finance processes. These systemic failures allowed the accounting errors to go undetected until they had significantly impacted the company's financial reporting.
Revised Outlook and Strategic Shift
The accounting scandal has forced WH Smith to dramatically slash its profit expectations. The company now expects profits from its US arm for 2024-25 to be between £5m and £15m, substantially lower than the originally forecast £55m and even below the £25m announced when the problem first came to light.
Group profits are forecast to be between £100m and £110m for the year to 31 August, representing a 55% decrease compared to the previous year. The timing is particularly challenging as the company focuses on its travel business following the recent sale of its high street operations, which have been rebranded as TGJones by the new owners.
Annette Court, WH Smith chair, issued an apology and acknowledged the need to strengthen controls and governance across the group. Cowling will remain employed until the end of February to ensure an orderly transition while the company searches for permanent leadership to implement its remediation plan and advance its strategy focusing on shops at global travel hubs.
