WH Smith shares tumble after retailer admits accounting blunder
Shares in WH Smith tumbled on Thursday after the newsagent and travel retailer admitted to an accounting blunder that has wiped tens of millions of pounds from its profits.
The FTSE 250 firm said a “financial review” identified an overstatement of around £30m of expected headline trading profit in its North America division that was “largely due to the accelerated recognition of supplier income” in the country.
As a result the firm confirmed profit in North America would be revised down to £25m from previous market expectations of £55m, cutting overall headline profit to £110m.
WH Smith said it had instructed auditors Deloitte to “undertake an independent and comprehensive review” and would provide a further update in its results announcement.
Tricky start for slimmed-down WH Smith
WH Smith shares fell 30 per cent to 775p in early London trade on Thursday. The stock has fallen by around two fifths over the past year.
Earlier this year the Swindon-based business put the finishing touches on a deal to sell its high street stores to private equity firm Modella, leaving the firm with its rail station and airport outlets.
The move which will see the WH Smith brand disappear from the high street after more than 200 years, with Modella planning to rebrand the sites “TG Jones.”
WH Smith was forced to cut its expected proceeds from the deal to £40m from £52m, amid lower-than-expected cash flow in the period leading up to the sale.
Throughout the last decade, WH Smith has focused almost entirely on its travel retail business, which operates in airports, train stations and hospitals.
With the travel retail business increasingly profitable, the high street business had accounted for just 15 per cent of WH Smith’s profit annually.