Carl Cowling has resigned as chief executive of WH Smith with immediate effect, following an independent investigation that uncovered a major accounting error within the company's American operations. The retailer has also issued a significant profit warning, slashing its forecasts.
Leadership Shakeup and Financial Fallout
The board has appointed Andrew Harrison, the current head of the group's UK division, as interim chief executive while a permanent successor is sought. This leadership crisis stems from an independent review conducted by Deloitte, which identified serious shortcomings in the US division's accounting practices.
The investigation revealed that profits in the American business had been overstated by as much as £50 million. As a result, WH Smith now anticipates profits from its US operations for the year to August 31 will be just £5 million to £15 million. This represents a dramatic reduction from the initial market expectation of £55 million and even the revised guidance of £25 million issued when the problem first emerged.
Broader Impact and Corporate Response
Profits for the entire WH Smith group are now expected to fall between £100 million and £110 million for the last financial year, which is lower than its previous earnings downgrade of £110 million. The company had delayed the publication of its full-year results, originally scheduled for November 12, with figures now expected on December 16.
WH Smith chairwoman Annette Court stated: "This is an extremely serious matter that has had the board’s full attention and we sincerely apologise for the shortcomings identified." She confirmed the company has acted swiftly to implement a comprehensive remediation plan to strengthen financial controls and governance across the group.
Carl Cowling, whose six-year tenure as CEO and 11-year career at the company ended abruptly, said: "Whilst the issues identified in the Deloitte review arose in our North American division, I recognise the seriousness of this situation and as group chief executive feel it is only right that I step down from my position."
Root Causes and Recovery Strategy
Deloitte's review pinpointed specific problems with the accounting treatment for supplier income in the US. The investigation found these issues had "arisen against a backdrop of a target-driven performance culture and decentralised divisional structure combined with a limited level of group oversight of the finance processes in North America."
The report also highlighted weaknesses in the composition of the US finance team and "insufficient systems, controls and review procedures for supplier income across commercial and finance functions."
As part of its recovery plan, WH Smith appointed a new chief executive for the US business in June and is reviewing the wider North America leadership team. The board is closely monitoring the implementation of these changes.
The developments come as WH Smith completes its transformation into a purely travel-focused retailer, having sold its high street chain of approximately 480 shops to Hobbycraft owner Modella Capital in June. The WH Smith name is now disappearing from British high streets, being replaced by the brand TGJones.
