WHSmith experienced a significant decline in its share price, dropping 38% on Thursday morning due to an accounting error that led to the overstatement of profits in North America. This issue prompted the company to lower its profit forecast for the region from an initial projection of £55 million to approximately £25 million for the year ending in August. Consequently, WHSmith also adjusted its annual pre-tax profit outlook to around £110 million.
The mistake was attributed to the miscalculation of supplier income, causing revenue to be recorded prematurely. In response to the error, WHSmith has engaged the auditing firm Deloitte to conduct a thorough review, with plans to provide updates during its full-year results announcement.
WHSmith, which recently divested its UK high street division, now focuses on operating as a travel retailer in locations such as airports and railway stations. Despite the company’s strategy to reposition itself following the sale of its high street arm, this accounting issue raises concerns about its financial management. Analysts suggest that the error could undermine investor confidence and may signal potential further complications within the company’s finances.
The situation highlights the crucial role that North America plays in WHSmith’s growth strategy. As the company works to regain market credibility, the impact of the error remains a focal point of scrutiny among investors and analysts alike. The future of WHSmith’s operations will depend on how effectively it addresses this accounting misstep and communicates its recovery plans to the market.
Source: https://www.bbc.com/news/articles/c3v363zr6kdo?at_medium=RSS&at_campaign=rss