WH Smith Chief Executive Steps Down Following US Accounting Investigation
The chief executive of British retailer WH Smith, Carl Cowling, has resigned from his position with immediate effect. This follows an independent investigation into a significant accounting error within the company's North American operations.
The probe, conducted by Deloitte, uncovered serious shortcomings that led the group to overstate its profits in the US by as much as £50 million. The board has appointed Andrew Harrison, the current chief of the UK division, as interim group CEO while it searches for a permanent replacement.
Profit Forecasts Slashed After Accounting Blunder
As a direct result of the accounting issues, WH Smith has been forced to drastically downgrade its profit expectations for the second time. The company now anticipates profits from its US travel business for the year ended 31 August will be between just £5 million and £15 million.
This figure is a stark contrast to the £55 million originally expected by the market and the £25 million forecast given when the problem was first identified. For the wider group, full-year profits are now projected to be in the range of £100 million to £110 million, lower than its previous downgrade.
Governance Failures and a Plan to Rebuild
Deloitte's review pinpointed the root cause as problems with the accounting treatment for supplier income. It concluded that these errors "arose 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 investigation also highlighted weaknesses within the US finance team and "insufficient systems, controls and review procedures". In response, WH Smith chairwoman Annette Court issued a sincere apology and acknowledged the seriousness of the matter.
"We have acted swiftly to build a comprehensive remediation plan and will reinforce the financial discipline and integrity that underpin our business moving forward," Court stated. "Our priority now is to rebuild trust and credibility."
Mr Cowling, who led the company for six years, said he felt it was right to step down given the gravity of the situation. The group has delayed the publication of its full-year results, which are now expected on 16 December.
