WH Smith’s chief executive has stepped down with immediate effect after a review found accounting failures in its North American division, prompting the travel shop chain to slash its profit outlook.
Nearly £600m was wiped off the retailer’s market value in a 42% one-day share price fall when the blunder emerged in August. It came shortly after the sale of its high street business, which has since been rebranded as TGJones by its new owners.
WH Smith shares climbed by more than 7% on Wednesday after Carl Cowling’s departure was announced, although they are still trading substantially below the levels seen before the August sell-off.
Cowling, who had been group chief executive for six years, will be replaced on an interim basis by the company’s UK chief executive, Andrew Harrison, until a permanent replacement is found.
An independent investigation by Deloitte said it had found “shortcomings” in the retailer’s North American division that exaggerated supplier income, leading the group to overstate profits at its US business by as much as £50m.
The review found weaknesses in the composition of the US finance team, as well as insufficient systems, controls and review procedures for supplier income in its commercial and finance teams. It also found the group had limited oversight of US finance processes.
Annette Court, the WH Smith chair, apologised and said the company recognised “the importance of strengthening controls, governance and reporting procedures across the group”.
She said: “Our priority now is to rebuild trust and credibility and to improve the performance and profitability of our North America division. We are confident that the actions we have taken and will continue to implement over the months ahead will ensure a strong foundation for the business going forward.”
Cowling said: “Whilst the issues identified in the Deloitte review arose in our North American division, I recognise the seriousness of this situation and as group CEO feel it is only right that I step down from my position.”
WH Smith, which is now focusing on its travel business and branches in airports and railway stations, had previously identified North America as a growth opportunity.
It warned that it expected profits for its US arm for 2024-25 to be between £5m and £15m, down from the £55m originally forecast and below the £25m announced on 21 August when the accounting blunder was first revealed.
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WH Smith’s group profits are forecast to be between £100m and £110m for the year to 31 August, about 55% lower than last year.
Cowling will remain employed by WH Smith until the end of February to ensure an orderly handover. The company said it would look to new leadership to “implement the remediation plan” and take the company through the next phase of its strategy to focus on its shops at global travel hubs.
Dan Coatsworth, the head of markets at the broker AJ Bell, said it was unlikely any chief executive could have survived a “catastrophic” episode in which nearly £600m was wiped off a company’s share price overnight.
He said: “Even if Cowling hadn’t resigned, his credibility at WH Smith was shattered by the scale of value destruction straight after selling the UK high street business. That strategic shift was meant to be a defining moment for the company, but it has gone down in history for the wrong reasons.”
