WH Smith chief executive Carl Cowling has stepped down after an independent review uncovered serious accounting failures in the retailer's US division. The probe revealed the company overstated American profits by as much as £50 million.
Andrew Harrison, head of the UK division, takes over as interim CEO while the company searches for a permanent replacement. The Deloitte investigation found "shortcomings" in financial controls and oversight that allowed the profit overstatement to occur.
The accounting errors hit WH Smith's bottom line hard. The company now expects US profits between £5 million and £15 million for the full year – a dramatic drop from the £55 million originally forecast. Group-wide profits are projected at £100 million to £110 million, down from previous guidance of £110 million.
What went wrong
Deloitte's review identified problems with how the US division accounted for supplier income. The issues emerged from «a target-driven performance culture and decentralised divisional structure combined with a limited level of group oversight of the finance processes in North America».
The investigation also found weaknesses in the US finance team and «insufficient systems, controls and review procedures for supplier income across commercial and finance functions».
Chairwoman Annette Court acknowledged the severity of the failures. «This is an extremely serious matter that has had the board's full attention and we sincerely apologise for the shortcomings identified,» she said. «Our priority now is to rebuild trust and credibility, and to improve the performance and profitability of our North America division.»
Swift exit
The revelations end Cowling's six-year tenure as CEO and his 11-year career at WH Smith. He accepted responsibility despite the problems originating in the US division.
«Whilst the issues identified in the Deloitte review arose in our North American division, I recognise the seriousness of this situation and as group chief executive feel it is only right that I step down from my position,» Cowling said.
WH Smith delayed its full-year results by more than a month due to the accounting issue. Figures for the year ending August 31 will now be published on December 16 instead of November 12.
Recovery plan
The company appointed a new US chief executive in June and is reviewing the wider North American leadership team. The board is monitoring a comprehensive remediation plan to strengthen controls and governance across the group.
WH Smith now operates 1,300 shops in global travel locations including airports, train stations and hospitals. The company sold its chain of about 480 high street shops to Hobbycraft owner Modella Capital in June. The WH Smith name is disappearing from British high streets, replaced by the TGJones brand.
Note: This article was created with Artificial Intelligence (AI).
