WH Smith experienced a significant decline in market value, losing nearly £600 million after the retailer revised its financial forecasts due to an accounting error in its North American division. The company’s shares fell by 42% following the revelation that profits for this division had been overstated by £30 million. WH Smith identified the error while preparing its year-end results, attributing it to the premature recognition of income related to supplier agreements that include rebates and payments for promotions.
The correction indicates that the division’s projected headline profits will decrease from £55 million to approximately £25 million. Consequently, the company’s overall pre-tax profits are now expected to be around £110 million, significantly below previous market expectations of £140 million.
To investigate the issue, WH Smith’s board has enlisted Deloitte to conduct an independent review. The mistake appears confined to the North American segment, which has seen recent leadership changes, including the appointment of Huw Crwys-Williams as the new chief executive.
WH Smith, which operates over 320 stores in the U.S., primarily in airports, also runs franchises for various brands. Comparisons have emerged between this situation and a previous accounting scandal involving Tesco, though there is no indication of wrongdoing by the auditing firm PwC, which has no direct connection to the WH Smith incident.
Market analysts have expressed concern regarding the implications of this profit warning, especially as WH Smith recently sold its struggling high-street division. Following this announcement, the company’s market valuation dropped to less than £900 million, a reduction from £1.4 billion at the market’s close the previous day.
Source: https://www.theguardian.com/business/2025/aug/21/wh-smith-cuts-profit-forecasts-after-30m-accounting-error