WH Smith chief executive Carl Cowling has stepped down after an investigation into an accounting blunder in its US division and as the retailer warned over profits once again.
Mr Cowling has been replaced by Andrew Harrison – chief executive of the group’s UK division – on an interim basis until a permanent successor is appointed.
It follows an independent review by Deloitte which found a number of “shortcomings” which saw the group overstate profits in the US business by as much as £50 million.
WH Smith warned it now expects profits in its US business for delayed full-year results in the range of £5 million to £15 million – down from the £55 million originally expected in the market and the £25 million revised guidance when the accounting issue was first uncovered.
Profits for the wider group are now expected to be between £100 million to £110 million for the year to August 31, which is lower than the £110 million in its previous earnings downgrade.
WH Smith chairwoman Annette Court said: “This is an extremely serious matter that has had the board’s full attention and we sincerely apologise for the shortcomings identified.
“While the issues identified arose in our North America division, we recognise the importance of strengthening controls, governance and reporting procedures across the group.
“We have acted swiftly to build a comprehensive remediation plan and will reinforce the financial discipline and integrity that underpin our business moving forward.
“Our priority now is to rebuild trust and credibility, and to improve the performance and profitability of our North America division.”
It brings to an abrupt end Mr Cowling’s six-year tenure at the helm and his 11-year career at the company.
He 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.”
WH Smith said in October it was delaying full-year results by more than a month due to the US accounting issue and Deloitte review.
Figures for the year to August 31 had been due on November 12, but are now expected to be published on December 16.
Deloitte’s review found issues with the accounting treatment for supplier income in the US, which it said 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”.
It also said there were weaknesses in the make-up of the US finance team and “insufficient systems, controls and review procedures for supplier income across commercial and finance functions”.
WH Smith appointed a new chief executive for the US business in June and is reviewing the wider North America leadership team as part of a recovery plan, which is being monitored by the board.
WH Smith is now focused solely on its 1,300 shops in global travel locations – such as in airports, train stations and hospitals – after it sold its high street chain of about 480 shops to Hobbycraft owner Modella Capital in June.
As part of the deal, the WH Smith name is disappearing from British high streets and being replaced by brand TGJones.
In August, bakery chain Greggs said it had delayed the appointment of incoming board director and former WH Smith finance chief Robert Moorhead due to the Deloitte review.
Mr Moorhead had been due to start at Greggs on October 1 as an independent non-executive director and chairman of the audit committee.
He left WH Smith in 2024 after more than 20 years at the chain.
Shares in WH Smith lifted 5% in Wednesday trading as investors breathed a “sign of relief” that the findings and downgrade were not worse, according to Peel Hunt.
Peel Hunt analysts said: “With the UK and Rest of World absolved of any wrong-doing, and the chief executive sadly having had to fall on his sword, we can look forward now.”
