London, WH Smithโs 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 ยฃ25 million for the year ending August, a sharp reduction from the ยฃ55 million forecast just months ago.
Consequently, WH Smith has revised its overall annual pre-tax profit outlook downward to around ยฃ110 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.
โWe identified that supplier income had been logged too early, which led to a material overstatement of profits in North America,โ a WH Smith spokesperson said. โWe are committed to addressing this issue transparently and are working closely with our auditors to ensure robust financial controls are in place.โ
Market Responds With Sharp Sell-Off
The announcement sent WH Smithโs share price tumbling, marking its worst daily performance on record. Equity analysts described the incident as a โmajor embarrassmentโ 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 โnothing short of a disasterโ for WH Smithโs prospects in North America, a region viewed as key to the companyโs future growth. โThe 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,โ Coatsworth added.
Evolution of WH Smithโs Business Model
WH Smithโs 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 groupโs 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.
โWH Smith has been looking to carve out a fresh identity as a travel retailer with high-margin operations,โ Coatsworth explained. โHowever, this US accounting setback has cast a shadow over those ambitions.โ
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 โreelingโ from the blown forecast and reputational damage. โGetting the numbers so wrong is not a good look and undermines investor confidence,โ 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 companyโs expansion strategy was heavily reliant on growth in the US market, which has proven to be fiercely competitive.
โChains like Walmart dominate North American retail, making market penetration particularly tough for overseas entrants like WH Smith,โ Shuttleworth said. โMoreover, 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.โ
Implications for WH Smithโs Future
The accounting error and consequent profit revision come at a critical juncture for WH Smith. Analysts suggest the companyโs ability to restore confidence with investors and stakeholders will depend on the outcome of Deloitteโs audit and its plans to strengthen financial oversight.
โThe firm must demonstrate transparency and tighten governance to reassure the market that this was an isolated incident,โ said industry commentator Michael Harding. โHow WH Smith manages this crisis could influence its trajectory in travel retail and any further expansion efforts abroad.โ
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 companyโs 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 Smithโs strategic responses and operational adjustments as the retailer seeks to regain footing and reaffirm its prominence in the global travel retail sector.
For more detailed analysis and ongoing coverage of US labor markets, trade policies, UK government, finances and markets stay tuned toย ย PGN Business Insider
