WH Smith Market Value Plummets by £600m Following North American Accounting Error

Published: 22 August 2025. The English Chronicle Desk

WH Smith saw almost £600 million wiped off its market value on Thursday after the retailer revealed a £30 million accounting error at its North American operations, prompting a sharp downward revision of financial forecasts and the launch of an independent review. Investors reacted swiftly, with the company’s shares plunging by 42% amid concerns over the overstated profits and broader implications for the group’s performance.

The accounting mistake, discovered during the preparation of year-end results, primarily stems from the early recognition of certain income streams. The error involved arrangements with suppliers, which provide rebates for meeting sales targets on specific products and payments for marketing and promotional activities. WH Smith clarified that these revenues should have been recorded in the next financial year rather than in the accounts for the 12 months ending 31 August.

As a result of the adjustment, headline profits from the North American business, which serves both the United States and Canada, are now projected at £25 million, down from previous market expectations of £55 million. The group’s pre-tax profits are now expected to be around £110 million, falling short of the broadly anticipated £140 million.

WH Smith has engaged Deloitte to conduct a thorough independent review of the accounting procedures at its North American division. The company has pledged to provide further updates at its preliminary results announcement. The error is understood to be contained within the North American operations, which recently appointed Huw Crwys-Williams as chief executive, having previously served as the group’s strategy director.

The North American business operates more than 320 stores, primarily in airports, under multiple local brands and the InMotion chain. WH Smith also manages franchise outlets in resorts for brands including Lego and Harley-Davidson, as well as local brands such as Paradiso and Havana Sundries through its MRG business.

Financial analysts warned that the profit warning would alarm investors and raise uncomfortable comparisons with previous accounting scandals in the UK retail sector. Retail analyst Nick Bubb described the revelation as having “gone down like a lead balloon,” noting parallels with the Tesco accounting scandal in 2014, when the supermarket chain admitted to overstating profits by £326 million due to similar supplier-related misstatements. While both WH Smith and Tesco were audited by PwC, there is no suggestion of wrongdoing by the advisory firm, and the current error is not believed to involve the same underlying issues.

Dan Coatsworth of broker AJ Bell described the accounting mistake as a “huge embarrassment to management,” stressing that it undermines what was intended to be a fresh start for the business following the sale of its struggling UK high street division to private equity firm Modella Capital, which is rebranding the outlets as TG Jones. The warning comes shortly after the company reduced the sale price of the high street business by £12 million in light of deteriorating performance in the months leading up to the transaction.

The decline in WH Smith’s shares has reduced its market value below £900 million, down from £1.4 billion at Wednesday’s close, as investors recalibrate expectations for the company’s profitability and long-term prospects. The situation highlights the ongoing challenges faced by legacy retail businesses navigating operational complexities across multiple markets while attempting to stabilise core revenue streams.