Deloitte conducts review into WH Smiths accounting error

WH Smith has tasked Deloitte with undertaking a probe of its books, after an accounting error wiped around £30 million from its expected annual trading profit in North America. The news has seen share values with the retailer dive by as much as 42%.

A historic British retail brand, WH Smith was first formed by Henry Walton Smith and his wife Anna in 1792. Initially established as a news vendor in London, the company eventually expanded into British travel retail – operating a recognisable chain of railway station, airport, port, hospital and motorway service station shops – selling books, stationery, magazines, newspapers, entertainment products and confectionery.

For 65 years, the firm was audited by Deloitte – but the changing of audit rotation rules led to a changing of the guard in the 2010s. PwC was installed as external auditor for WH Smiths – with its contract most recently renewed in 2023, running up to and including the end of its current financial year.

WH Smith has had to return to its old Big Four auditor for help just as that period draws to a close, however, amid the emergence of a major accounting blunder. Analysts have since reported "huge embarrassment" for the retailer, with its group having overstated expected trading profit for North America of £55 million – now reduced to £25 million for the financial year ending on August 31st.

Changed estimations

As a result, the company has trimmed its outlook for annual pre-tax profits to around £110 million. The news panicked investors, with WH Smith shares slumping by 42% the day following the announcement of the error.

WH Smith finds itself facing this “embarrassment” at a time of major change for the London-listed firm. At the start of the year, it sold its High Street arm to Hobbycraft owner Modella Capital earlier this year – meaning that WH Smith disappeared from high streets, being replaced by brand TGJones. As WH Smith looks to refocus on its remaining travel retail business around the world, North America remains crucial to its growth ambitions.

Deloittewill now conduct a review into the error. The audit and advisory giant has also said it will provide an update on this review alongside WH Smith’s full-year results.