WH Smith Faces Investor Backlash After £30m Accounting Error in North America
Published 21 August 2025
Highlights
- WH Smith shares plummeted 42% after revealing a £30m accounting error in its North American division, wiping nearly £600m off its market value.
- The error stemmed from prematurely logged supplier income, prompting WH Smith to revise its North American profit forecast from £55m to £25m.
- Deloitte has been commissioned to conduct an independent review of the accounting blunder, with results expected alongside the company's full-year financial report.
- The incident has raised concerns about WH Smith's financial controls and the sustainability of its North American growth strategy.
- Analysts have drawn parallels to past accounting scandals, emphasizing the potential long-term impact on investor confidence and market performance.
WH Smith has faced a dramatic 42% drop in its share price following the revelation of a significant accounting error in its North American operations. The error, which led to an overstatement of profits by £30m, has resulted in a substantial £600m reduction in the company's market value. This development has prompted the retailer to revise its profit forecast for the region from an anticipated £55m to £25m for the year ending in August.
The error was attributed to the premature logging of supplier income, a mistake that has cast a shadow over WH Smith's ambitions for growth in North America. The company, which recently sold its UK High Street division to focus on its travel retail business, has now commissioned Deloitte to conduct an independent review of the accounting practices involved. The findings of this review are expected to be disclosed alongside WH Smith's full-year results.
The implications of this blunder extend beyond immediate financial losses. Analysts have expressed concerns about the robustness of WH Smith's financial controls and the potential impact on its North American strategy, which was seen as a key growth area following the sale of its UK retail arm. The company's reliance on supplier income, which includes rebates and marketing payments, has come under scrutiny, with questions raised about the sustainability of its profit margins without these contributions.
The incident has drawn comparisons to previous accounting scandals, such as the Tesco debacle in 2014, which took years for the retailer to recover from. While there is no suggestion of wrongdoing by WH Smith's auditors, the situation has revived memories of the challenges faced by companies when financial misstatements occur.
As WH Smith navigates this crisis, the focus will be on restoring investor confidence and ensuring that its North American operations can deliver on their growth potential. The outcome of Deloitte's review will be crucial in determining the next steps for the retailer and its stakeholders.
What this might mean
The immediate future for WH Smith hinges on the findings of Deloitte's independent review. Should the audit uncover further discrepancies, the retailer may face additional financial adjustments and a prolonged period of investor skepticism. Conversely, a clean bill of health could help stabilize the company's share price and reassure stakeholders.
In the longer term, WH Smith will need to address the underlying issues in its financial controls to prevent similar incidents. This may involve revising its accounting practices and enhancing oversight mechanisms. The company's ability to maintain its North American growth trajectory will be critical, particularly as it competes with established players like Walmart.
Ultimately, WH Smith's response to this crisis will determine its reputation and financial health in the coming years. The retailer's leadership will need to demonstrate transparency and accountability to regain the trust of investors and the market.
