WH Smith Delays Financial Results Amid Accounting Errors

WH Smith is preparing to release its financial results for the year ending August 31, 2023, next week, following a series of accounting errors that led to the resignation of its chief executive, Carl Cowling. The historic retailer, which has shifted its focus predominantly to travel stores, had originally scheduled the announcement for November 12, but this date has been postponed multiple times, now set for December 19.

The delay stems from the need for auditing firm PwC to complete necessary procedures after an independent review by Deloitte uncovered significant discrepancies in the retailer’s accounting practices. These issues reportedly resulted in an overstatement of profits in the North American division by as much as £50 million. Consequently, WH Smith anticipates a substantial decline in profits, particularly from its US operations, which are now expected to yield between £5 million and £15 million, a sharp contrast to earlier forecasts of £55 million.

The retailer’s share price has experienced significant volatility, dropping by as much as 40% after the profit overstatement came to light. In light of these developments, WH Smith has revised its profit forecasts, with expectations for pre-tax profits now estimated between £100 million and £110 million, down from £171 million the previous year.

WH Smith’s strategic pivot earlier this year involved selling its UK high street stores, approximately 480 locations, to Modella Capital, the owner of Hobbycraft. This move aimed to concentrate efforts on its travel retail segment, which includes 1,300 shops located in airports, train stations, and hospitals. As part of this transition, the WH Smith name is being replaced by the brand TGJones in British high streets.

In a statement to shareholders, WH Smith emphasized that the additional time required for the audit process is crucial for ensuring accuracy in the financial reporting. The upcoming results are expected to provide a clearer picture of the company’s financial health, as it navigates the challenges posed by the recent accounting issues and its ongoing transformation in the retail sector.