WH Smith Faces Executive Exodus Amid North American Accounting Scandal

The board of WH Smith is deliberating whether to reclaim bonuses previously awarded to senior executives following a significant accounting error in its North American business. This episode prompted the sudden resignation of chief executive Carl Cowling, after an independent review by Deloitte highlighted a profit overstatement of approximately £30 million. The revelation caused nearly £600 million to be wiped from the company’s valuation in a single day.

Deloitte’s review, prompted by the discovery in August, concluded that the issues derived from a target-driven performance culture within the North American division, which lacked sufficient group-level oversight. Although Cowling was not said to have known about the irregularities, he stated his recognition of the gravity of the situation and considered it appropriate to resign.

Between 2023 and 2024, Cowling and Robert Moorhead, the former chief financial officer, received a combined £3.3 million in annual bonuses; total bonus and share incentive payments between 2020 and 2024 reached £9.8 million. While awarding decisions for 2025 remain outstanding, the board’s potential clawback of prior bonuses follows findings that the accounting treatment for supplier income was inconsistent both with company policy and accounting standards. Deloitte confirmed that the financial practices of WH Smith’s UK and other international businesses were sound, lifting investor confidence and raising the share price.

This crisis arrives shortly after the retailer’s landmark sale of its 233-year-old high street operation to Modella Capital, in line with its new focus on travel retail. In the wake of the incident, profit guidance for the North American business has been lowered to between £5 million and £15 million, down from an earlier forecast of £25 million. Group trading profit expectations now range from £100 million to £110 million, less than half of the previous year’s result.

WH Smith has moved to strengthen governance, enhance financial controls, and accelerate the implementation of a new supplier income management system across all divisions. Newly appointed leaders have taken charge as the company seeks to rebuild confidence among investors and business partners. The interim chief executive, Andrew Harrison, brings experience from Manchester Airports Group and Marks and Spencer to an organisation now facing the challenge of restoring its reputation after rapid international expansion.

The accounting misstep was triggered by the premature recognition of supplier income, a practice that inflates short-term profit levels and may be influenced by incentive schemes tied to performance. The board has committed to developing a robust remediation plan, with a focus on transparency, accountability, and a culture grounded in integrity to prevent the recurrence of similar failings.

Despite the negative headlines, the containment of the issues within the North American division offers some reassurance to stakeholders. Analysts noted that the timing of revenue recognition rather than the existence of funds was at fault, isolating the impact to the US. Steps to realign management and procedures are expected to underpin long-term stability as WH Smith pursues its refined ambition in the travel retail sector.