Shares in WH Smith fell sharply on Thursday after the newsagent and travel retailer revealed an accounting error that has significantly impacted its profits. The FTSE 250 company disclosed that a “financial review” had identified an overstatement of approximately £30 million in expected headline trading profit within its North America division. This discrepancy was primarily attributed to the accelerated recognition of supplier income in the region.
Consequently, WH Smith announced that its profit forecast for North America would be revised downward to £25 million, compared to previous market expectations of £55 million. This adjustment reduces the overall headline profit to £110 million. The company has engaged auditors Deloitte to conduct an independent and comprehensive review and will provide further updates in its upcoming results announcement.
WH Smith shares dropped by 30% to 775p in early London trading on Thursday, marking a decline of around 40% over the past year. Earlier this year, the Swindon-based company completed a deal to sell its high street stores to private equity firm Modella, retaining only its outlets in rail stations and airports. This transaction will see the WH Smith brand exit the high street after more than two centuries, with Modella planning to rebrand the locations as “TG Jones.”
The company was compelled to lower its expected proceeds from the sale to £40 million from an initial estimate of £52 million, due to lower-than-anticipated cash flow in the period preceding the transaction.
Over the last decade, WH Smith has concentrated its efforts on its travel retail business, which operates in airports, train stations, and hospitals. With the travel retail sector becoming increasingly profitable, the high street business accounted for just 15% of WH Smith’s annual profit.
