WH Smith shares plunged 42% on Thursday, marking one of the company’s worst single-day declines on record, after it revealed an accounting error that led to an overstatement of profits in its North American division.
The London-listed retailer, which now operates primarily as a travel-focused brand in airports, railway stations, hospitals, and service stations, admitted the mistake arose from an issue in calculating supplier income, effectively logging revenues too early. The error forced the company to cut its profit forecasts for the North American market from an originally projected £55 million to around £25 million for the year ending August. Consequently, WH Smith has lowered its overall pre-tax profit outlook to approximately £110 million.
To ensure transparency and restore investor confidence, WH Smith has commissioned accountancy firm Deloitte to conduct a detailed review of the error and has promised to provide updates alongside its full-year results.
Analysts described the blunder as a serious setback for a company seeking a fresh start after selling its UK High Street arm to Hobbycraft owner Modella Capital earlier this year. The sale led to the disappearance of the WH Smith name from British High Streets, replaced by the TGJones brand, while the group has focused on travel retail operations worldwide.
Dan Coatsworth, investment analyst at AJ Bell, said the accounting error was “nothing short of a disaster.” He noted the critical role of North America in WH Smith’s growth ambitions: “The loose thread of an accounting error in this part of the group raises concerns about other potential issues. Investors will be sobbing into their cornflakes on the news.”
Despite travel retail outlets benefiting from a captive audience that allows for higher margins, the North American misstep has dampened optimism. “The US news has tarnished what WH Smith would have hoped could be a fresh start for the business,” Coatsworth added.
Shareholders are also reportedly concerned about the reputational impact of the error. Susannah Streeter, head of money and markets at Hargreaves Lansdown, said: “Getting it so wrong is not a good look and affects the reputation of the company. Shareholders are understandably reeling from this mistake.”
Retail analysts note that WH Smith’s pivot to travel retail and the sale of its High Street operations were largely predicated on the potential for growth in North America. Catherine Shuttleworth, a retail analyst, said: “The sale of the High Street business was based on expansion in the US market. But competition is fierce, with chains like Walmart dominating the space. WH Smith cannot rely solely on buying and selling; much of its revenue now comes from working with retailers and paying for product listings to be seen in stores.”
The company’s strategic focus on airports and travel hubs had been expected to deliver steady margins and a stable growth trajectory, but the accounting miscalculation has raised questions about governance and financial oversight.
As the company prepares to release its full-year results, investors and industry watchers will be closely monitoring how WH Smith addresses the error and restores confidence in its North American operations, which are now central to its long-term business strategy.
