London, WH Smith’s shares suffered a steep 42% decline on Thursday after the company disclosed an accounting error that led to an overstatement of its North American profits. The retailer subsequently lowered its profit forecasts for the region and has initiated an independent review into the mistake.
Accounting Error Triggers Significant Profit Downgrade
WH Smith, a leading travel retailer listed on the London Stock Exchange, revealed that an internal accounting issue had caused supplier income to be recognised prematurely, inflating previously reported earnings in its North American division. The company now expects a trading profit of approximately £25 million for the year ending August, a sharp reduction from the £55 million forecast just months ago.
Consequently, WH Smith has revised its overall annual pre-tax profit outlook downward to around £110 million. The company has appointed Deloitte to conduct a thorough review of the accounting procedures involved and expects to provide a detailed update when it releases its full-year financial results later this year.
“We identified that supplier income had been logged too early, which led to a material overstatement of profits in North America,” a WH Smith spokesperson said. “We are committed to addressing this issue transparently and are working closely with our auditors to ensure robust financial controls are in place.”
Market Responds With Sharp Sell-Off
The announcement sent WH Smith’s share price tumbling, marking its worst daily performance on record. Equity analysts described the incident as a “major embarrassment” for the company, which had been pursuing growth following the strategic divestment of its traditional UK High Street stores earlier this year.
Dan Coatsworth, an investment analyst at AJ Bell, described the error as “nothing short of a disaster” for WH Smith’s prospects in North America, a region viewed as key to the company’s future growth. “The loose thread of an accounting error in this part of the group raises concerns over broader operational risks. Investors will be sobbing into their cornflakes on the news,” Coatsworth added.
Evolution of WH Smith’s Business Model
WH Smith’s recent history has seen a significant shift in its business operations. Earlier in 2025, the retailer sold its UK High Street division to private equity firm Modella Capital, leading to the disappearance of the WH Smith brand from British high streets. The retail outlets formerly under the WH Smith banner now operate as TGJones.
The group’s core focus has since pivoted to travel retail, primarily serving airports, railway stations, hospitals, and motorway service areas worldwide. This segment benefits from a captive customer base and generally yields stronger profit margins compared to standard high street retail.
“WH Smith has been looking to carve out a fresh identity as a travel retailer with high-margin operations,” Coatsworth explained. “However, this US accounting setback has cast a shadow over those ambitions.”
Industry Context and Growing Competitive Pressures
Susannah Streeter, head of money and markets at investment firm Hargreaves Lansdown, noted that shareholders are likely to be “reeling” from the blown forecast and reputational damage. “Getting the numbers so wrong is not a good look and undermines investor confidence,” she said.
Retail analysts also highlight the challenging environment WH Smith faces in North America. Catherine Shuttleworth, a retail expert and consultant, pointed out that the company’s expansion strategy was heavily reliant on growth in the US market, which has proven to be fiercely competitive.
“Chains like Walmart dominate North American retail, making market penetration particularly tough for overseas entrants like WH Smith,” Shuttleworth said. “Moreover, success in retail today is not simply about buying and selling goods; it requires building strong partnerships with brands and securing premium product placements within stores.”
Implications for WH Smith’s Future
The accounting error and consequent profit revision come at a critical juncture for WH Smith. Analysts suggest the company’s ability to restore confidence with investors and stakeholders will depend on the outcome of Deloitte’s audit and its plans to strengthen financial oversight.
“The firm must demonstrate transparency and tighten governance to reassure the market that this was an isolated incident,” said industry commentator Michael Harding. “How WH Smith manages this crisis could influence its trajectory in travel retail and any further expansion efforts abroad.”
The recent developments also raise broader questions about corporate reporting standards and the challenges multinational retailers face as they navigate complex supplier arrangements and revenue recognition across diverse territories.
Looking Ahead: What to Expect
WH Smith is scheduled to release its full-year financial report in the coming months, which will shed light on the extent of the accounting misstatement and provide clearer guidance on future earnings.
Meanwhile, the company’s leadership team faces pressure to deliver a convincing recovery plan amid uncertainties about the pace of post-pandemic travel growth, fluctuating consumer behavior, and intensifying competition.
Investors and industry watchers will closely monitor WH Smith’s strategic responses and operational adjustments as the retailer seeks to regain footing and reaffirm its prominence in the global travel retail sector.
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