WH Smith Delays Financial Results Amid Accounting Issues

WH Smith plans to announce its financial results next week after a delay caused by accounting errors that led to the resignation of its chief executive. The historic retailer, now concentrating on travel stores, will disclose its annual results for the year ending August 31, 2023, on Friday, December 19. The announcement is anticipated to reveal a significant drop in profits, particularly due to previously overstated earnings from its North American operations.

The release of WH Smith’s results was originally scheduled for November 12 but was postponed to December 16. On December 12, the company announced another delay, citing the need to provide auditor PwC with additional time to complete necessary audit procedures.

This postponement follows the resignation of Carl Cowling, WH Smith’s chief executive, who stepped down last month after an independent review by Deloitte confirmed several accounting discrepancies. The retailer first disclosed these issues in August, which resulted in a dramatic drop in its share price by as much as 40%. The overstatement of trading profit in North America led to a revision of profit forecasts.

According to the Deloitte report, WH Smith overstated profits in its US business by as much as £50 million. The company has since revised its expectations for the delayed full-year results, now estimating profits in the US business to be between £5 million and £15 million. This is a significant decrease from the original market expectation of £55 million, as well as the £25 million revised guidance issued when the accounting issues first emerged.

WH Smith has shifted its focus entirely to its approximately 1,300 shops located in global travel destinations, such as airports, train stations, and hospitals, following the sale of its UK high street stores. Earlier this year, the company sold its chain of around 480 shops to Modella Capital, the owner of Hobbycraft. Consequently, the WH Smith brand is disappearing from British high streets and is being replaced by the TGJones name.

As part of the upcoming results, WH Smith is expected to report pre-tax profits in the range of £100 million to £110 million for the past financial year. This would mark a significant decline from the £171 million profit recorded a year earlier. The challenges facing WH Smith highlight the ongoing difficulties in the retail sector, particularly as the company navigates its transition to a travel-focused business model in a competitive market.