WH Smith Plc slumped the most on record after the discovery of an accounting error forced it to slash its profit outlook in North America, a major setback in a key growth market for the British retailer.
The shares plunged as much as 42% in London trading, cutting the company’s market value to about £830 million ($1.1 billion).
A financial review found an overstatement of about £30 million in expected headline trading profit for North America in the year ending Aug. 31, WH Smith said Thursday. The error came after it booked income from suppliers earlier than it should have. The board appointed accounting firm Deloitte to undertake an independent review of the matter.
The scale of the overstatement is “quite shocking” and will likely impact management credibility, Goodbody analyst Fintan Ryan said in a note. “We would expect the market to assume the worst, for now at least.”
Founded in London in 1792, WH Smith has long been one of the U.K.’s best-known retailers selling books, newspapers, magazines and stationery. But it has increasingly focused on North America, where it has more than 320 stores under brands such as District Market, Flight Stop and Root & Branch.
It’s targeting 500 shops in the region by 2028, the company said last year. It also operates franchised stores including Tom Ford, Lego and Harley Davidson, according to its website.
The revision lowers WH Smith’s profit forecast to £25 million in North America. Overall, the group now expects full-year headline profit before tax and non-underlying items of around £110 million.
This year, it sold its U.K. network of about 480 High Street stores to investment firm Modella Capital to concentrate on its more lucrative travel division, which operates in major airports, hospitals and train stations around the world.
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