{"id":42748,"date":"2025-08-21T11:35:31","date_gmt":"2025-08-21T11:35:31","guid":{"rendered":"https:\/\/quickassetsmarket.com\/index.php\/2025\/08\/21\/wh-smith-shares-tumble-40-after-30m-accounting-error-in-north-america\/"},"modified":"2025-08-21T11:35:31","modified_gmt":"2025-08-21T11:35:31","slug":"wh-smith-shares-tumble-40-after-30m-accounting-error-in-north-america","status":"publish","type":"post","link":"https:\/\/quickassetsmarket.com\/index.php\/2025\/08\/21\/wh-smith-shares-tumble-40-after-30m-accounting-error-in-north-america\/","title":{"rendered":"WH Smith shares tumble 40% after \u00a330m accounting error in North America"},"content":{"rendered":"
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Shares of WH Smith plunged by nearly 40% on Thursday after the travel retailer revealed it had overstated earnings at its North American division, forcing a steep downgrade to its annual profit forecast. <\/p>\n

The company said a financial review found that supplier income in the region had been booked too early, inflating headline trading profit expectations by around \u00a330 million ($40.34 million).<\/p>\n

The discovery has cut expected profit for the division to roughly \u00a325 million, less than half of the previous estimate of \u00a355 million. <\/p>\n

As a result, WH Smith now anticipates group pre-tax profit for the year ending August 31 will be about \u00a3110 million, sharply lower than the \u00a3156.9 million forecast by analysts polled by LSEG.<\/p>\n

Independent review launched; shock compared to Tesco profit overstatement <\/h2>\n

The company said it had instructed Deloitte to conduct an independent and comprehensive review of the accounting issue. <\/p>\n

\u201cThe group will provide a further update at its preliminary results announcement,\u201d WH Smith told investors.<\/p>\n

The profit warning has rattled investors and revived memories of past accounting scandals in the UK retail sector. <\/p>\n

Analyst Nick Bubb said the announcement \u201cwent down like a lead balloon with investors\u201d and compared the shock to Tesco\u2019s 2014 profit overstatement, though there is no suggestion that WH Smith\u2019s case is linked to similar practices.<\/p>\n

Tesco revealed in 2014 that it had overstated profits by \u00a3326m after wrongly booking supplier payments tied to marketing and sales targets, a scandal that took years to overcome. <\/p>\n

WH Smith\u2019s accounting error is not linked to the same issues.<\/p>\n

Market reaction and debt concerns<\/h2>\n

The sharp sell-off sent WH Smith shares to their lowest point since March 2020, making them the biggest percentage decliners on the FTSE mid-cap index. <\/p>\n

The news comes just months after the company sold its UK high street operations to focus fully on its travel retail business.<\/p>\n

North America, its second-largest market, has been a key pillar of growth, accounting for about 20% of group revenue in fiscal 2024. <\/p>\n

However, its aggressive expansion there has coincided with rising debt, putting pressure on cash reserves at a time of heightened global economic uncertainty in the travel sector.<\/p>\n

Analysts say development to pressure share price in the near term<\/h2>\n

Market commentators warned that the accounting error could undermine investor confidence.<\/p>\n

JPMorgan analysts said the development was \u201ca big negative surprise\u201d and warned that questions over accounting transparency would linger, weighing on sentiment in the near term.<\/p>\n

“This raises a number of issues around its accounting, which are unlikely to be explained straight away and are likely to be a drag on the shares in the meantime,” they said.<\/p>\n

AJ Bell\u2019s Dan Coatsworth called the update \u201cnothing short of a disaster,\u201d adding it would fuel fears of further problems.<\/p>\n

“WH Smith needs to get ahead of its North American unit accounting issue quickly and make the necessary changes to rebuild credibility with the market,” Coatsworth said. <\/p>\n

RBC analysts, however, struck a more measured note, saying WH Smith should be able to recover most of the overstated profits in future years, with the immediate impact limited to a small hit on cash. <\/p>\n

They added that WH Smith has the potential to return to strong long-term travel growth with cash returns, but this is taking longer than they expected.<\/p>\n

For now, WH Smith faces the challenge of reassuring investors that its controls are robust and that its North American expansion, a central plank of its growth strategy, can remain on track despite the setback.<\/p>\n

The post WH Smith shares tumble 40% after \u00a330m accounting error in North America<\/a> appeared first on Invezz<\/a><\/p>\n

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Shares of WH Smith plunged by nearly 40% on Thursday after the travel retailer revealed it had overstated earnings at its North American division, forcing a steep downgrade to its annual profit forecast. The company said a financial review found that supplier income in the region had been booked too early, inflating headline trading profit <\/p>\n","protected":false},"author":1,"featured_media":42749,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[5],"tags":[],"class_list":{"0":"post-42748","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-investing"},"_links":{"self":[{"href":"https:\/\/quickassetsmarket.com\/index.php\/wp-json\/wp\/v2\/posts\/42748","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/quickassetsmarket.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/quickassetsmarket.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/quickassetsmarket.com\/index.php\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/quickassetsmarket.com\/index.php\/wp-json\/wp\/v2\/comments?post=42748"}],"version-history":[{"count":0,"href":"https:\/\/quickassetsmarket.com\/index.php\/wp-json\/wp\/v2\/posts\/42748\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/quickassetsmarket.com\/index.php\/wp-json\/wp\/v2\/media\/42749"}],"wp:attachment":[{"href":"https:\/\/quickassetsmarket.com\/index.php\/wp-json\/wp\/v2\/media?parent=42748"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/quickassetsmarket.com\/index.php\/wp-json\/wp\/v2\/categories?post=42748"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/quickassetsmarket.com\/index.php\/wp-json\/wp\/v2\/tags?post=42748"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}