High street and travel retailer WH Smith has launched a bid to recover millions of pounds in bonuses from its former top executives, following a devastating accounting scandal in its North American division that has triggered a formal investigation by the UK's financial watchdog.
Profits Plunge Amidst Accounting Crisis
The full scale of the fallout became clear as the company revealed its annual results. Pre-tax profits for the year to August 2025 collapsed to just £16m, a dramatic drop from the £73m reported the previous year. This staggering decline included a hefty £92m in one-off costs, largely linked to the accounting debacle. Despite the turmoil, group sales managed to rise by 5% to reach £1.5bn.
The crisis erupted in August when the company identified significant errors in how it accounted for supplier income and provisions for lost stock within its North American arm, with issues dating back to 2023. An independent review conducted by Deloitte later found that profits in the division had been overstated by as much as £50m. The revelation wiped almost £600m from the retailer's stock market value overnight and led to the departure of chief executive Carl Cowling last month.
Formal FCA Investigation and Bonus Clawback
On Friday, WH Smith confirmed that the Financial Conduct Authority (FCA) has now opened a formal investigation into the company's compliance with UK listing, disclosure, and transparency rules. This move escalates the preliminary inquiries the regulator was understood to have begun last month.
In a direct response to the profit restatements for the 2023 and 2024 financial years, the company's board announced it would be "applying malus and clawback to recover overpaid bonuses" from former leaders. The targets are ex-chief executive Carl Cowling and former finance director Robert Moorhead, who left the business last year.
Together, Cowling and Moorhead received just over £7m in bonuses and long-term share awards for the affected periods. Cowling took home approximately £4m, while Moorhead received just under £3m. WH Smith has stated it will seek to reclaim these funds, though the exact final sum remains unclear.
A Roadmap to Recovery
Andrew Harrison, the retailer's interim chief executive, acknowledged the profound challenges facing the group. "It has been a difficult end to the year for the Group," he said. "The board and I are acutely aware that we have much to do to rebuild confidence in WH Smith and deliver stronger returns as we move forward."
Harrison outlined a clear remediation plan designed to strengthen governance and internal controls, supported by new systems. As part of a strategic simplification, the company is exiting unprofitable fashion and specialty stores in North America, which operate under brands like Misura and Marshall Rousso in holiday resorts. It is also reviewing its North American InMotion technology retail portfolio.
The scandal emerged just months after WH Smith sold its traditional high street business, now rebranded as TGJones. The company had previously identified its travel outlets in airports and railway stations, particularly in North America, as a key growth opportunity—a strategy now under severe scrutiny following the accounting failure.
