In a dramatic turn of events, WH Smith's chief executive has departed with immediate effect following the discovery of serious accounting failures within the company's North American operations that forced a massive profit outlook reduction.
Leadership Upheaval and Market Turmoil
Carl Cowling, who had led WH Smith as group chief executive for six years, has stepped down following an independent investigation that revealed significant shortcomings in the retailer's US finance operations. The accounting blunder, which emerged in August, prompted the company to slash its profit forecast and saw approximately £600m wiped off WH Smith's market value in a single day.
Shares in the company experienced a devastating 42% one-day plunge from which they haven't recovered, leaving the travel-focused retailer reeling shortly after completing the sale of its high street business to new owners, who have rebranded it as TGJones.
Investigation Reveals Systemic Failures
The independent review conducted by Deloitte uncovered "shortcomings" in WH Smith's North American division that artificially inflated supplier income, leading the group to overstate profits at its US business by as much as £50m. The investigation identified multiple critical weaknesses including problems with the composition of the US finance team, insufficient systems and controls for supplier income, and limited group oversight of US finance processes.
Annette Court, WH Smith's chair, issued a public apology and acknowledged the urgent need for improvement. "We recognise the importance of strengthening controls, governance and reporting procedures across the group," she stated. "Our priority now is to rebuild trust and credibility and to improve the performance and profitability of our North America division."
Revised Forecasts and Strategic Shift
The company has dramatically revised its profit expectations for the US arm for 2024-25, now forecasting between £5m and £15m compared to the originally projected £55m. This figure is even lower than the £25m estimate announced in August when the accounting error first came to light.
Group profits are now expected to be between £100m and £110m for the year to 31 August, representing a staggering 55% decrease compared to the previous year. The company confirmed that Carl Cowling will remain employed until the end of February to ensure an orderly transition.
Andrew Harrison, currently WH Smith's UK chief executive, will take over as interim CEO while the company searches for a permanent replacement. WH Smith emphasised that new leadership would be crucial to implementing the remediation plan and driving forward the company's strategy to focus on its shops at global travel hubs, having previously identified North America as a key growth opportunity.
In his departing statement, Cowling acknowledged the seriousness of the situation: "Whilst the issues identified in the Deloitte review arose in our North American division, I recognise the seriousness of this situation and as group CEO feel it is only right that I step down from my position."
