WH Smith faces UK probe over accounting

WH Smith Plc is under investigation by the UK’s Financial Conduct Authority over the accounting error in its North American business that triggered a stock slump and the resignation of its chief executive officer.

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The embattled retailer also cut its annual dividend for the first time since the pandemic in its delayed full-year results Friday. 

The FCA is looking at potential breaches of U.K. listing and disclosure rules relating to the company’s findings set out on Nov. 19, the regulator said separately. An independent review by Big Four firm Deloitte blamed the accounting error partly on lack of oversight, WH Smith said then, and CEO Carl Cowling resigned.

Adding to the fallout, WH Smith said it would apply malus and clawback to recover overpaid bonuses from former executive directors it didn’t identify.

The shares tumbled as much as 6.6% in London and are heading for their worst year on record. They were down 42% in 2025 through Thursday’s close.

The probe undermined WH Smith’s effort to draw a line under what it called a “difficult end” to a year in which the company was feted by analysts over the sale of its struggling network of high street stores, before things went south.

“Credibility hangs in the balance,” said Dan Lane, analyst at brokerage Robinhood UK. “The North American downgrade has been brutal.”

The crisis began in August when WH Smith said it had overstated trading profit by about £30 million ($40.1 million) in its North America business, by booking income from suppliers — which it gets from product promotions and rebates — earlier than it should have.

‘Limited oversight’

WH Smith responded by lowering its forecast, and did so again after Deloitte finished its investigation. Its review found a “target-driven performance culture” in North America and a “limited level of group oversight” of its finance processes. WH Smith said it was reviewing its leadership team in the region.

The company risks a fine from the FCA after an investigation that’ll likely drag on for months. The watchdog will use the size of the accounting error as a starting point for any penalty if it finds any wrongdoing.

The impact has reverberated beyond WH Smith. Former chief financial officer Robert Moorhead, who left WH Smith in February, withdrew from his appointment to the board of bakery chain Greggs Plc.

WH Smith reported group pretax profit of £108 million in the 12 months ended Aug. 31, in line with last month’s downgraded forecast. Prior to the accounting snafu, analysts expected about £150 million. The company expects pretax profit to be £100 million to £115 million in its 2026 financial year.

Trading profit in North America, where its brands include District Market and Root & Branch, fell to £15 million from £34 million a year earlier. WH Smith said it plans to review its InMotion stores and expects some closures, and the company said it wants to avoid “unnecessary expansion.”

WH Smith cut its final dividend payout to 6 pence, bringing the full-year total to 17.3 pence.

In the U.K., the company said it faces a challenging consumer outlook, driven by what it called “sustained inflationary pressure.”

Founded in London in 1792, WH Smith is one of the U.K.’s best-known retailers selling books, newspapers, magazines and stationery. But since the sale of its high-street stores to investment firm Modella Capital, it is focused on its network in airports and train stations, as well as hospitals.