WH Smith Revises Down Profit Forecast Due to North America Overstatement

What's Happening?

British retailer WH Smith has announced a significant revision to its profit forecast, citing an overstatement of approximately £30 million in expected headline trading profit from its North America division. This announcement was made through a Stock Exchange notice, leading to a sharp 30% drop in the company's share price. The revised guidance indicates that the headline trading profit for the North America division for the financial year ending August 31, 2025, is expected to be around £25 million, down from the previous expectation of £55 million. The company has attributed this overstatement to the accelerated recognition of supplier income. As a result, WH Smith anticipates its full-year headline profit before tax and non-underlying items to be approximately £110 million. Deloitte has been instructed to conduct an independent review of the situation.

Why It's Important?

The revision of WH Smith's profit forecast has significant implications for investors and the company's financial health. The sharp decline in share price reflects investor concerns about the company's financial management and transparency. The overstatement of profits in North America highlights potential issues in accounting practices, which could affect investor confidence and the company's market valuation. The involvement of Deloitte in conducting an independent review suggests that WH Smith is taking steps to address these concerns and restore trust. This development may also impact the company's strategic decisions and operations in North America, potentially influencing its future growth and profitability.

What's Next?

WH Smith is scheduled to release its full-year results on November 12, which will provide further insights into the company's financial performance and the impact of the profit revision. The independent review by Deloitte may lead to changes in accounting practices or management strategies to prevent similar issues in the future. Investors and stakeholders will be closely monitoring the company's actions and any updates regarding the review process. The outcome of this situation could influence WH Smith's reputation and its ability to attract investment and maintain market stability.