WH Smith shares fell on Friday after the travel-focused retailer announced that profits slumped during the period its CEO left due to an accounting error.
The company also faces an FCA probe into the accounting error, which was confirmed on Friday.
WH Smith’s profit before tax for the year ended 31 August tumbled to £16m from £73m in the same period a year prior. This was despite group revenue rising 5% to £1,553m.
The group is facing issues in its North American unit, where trading profits have halved. WH Smith said it’s in the process of exiting from unprofitable fashion and specialty stores in the region.
The UK was steady, but not nearly exciting enough to spark a rally in shares, which were down 5% at the time of writing on Friday. WH Smith shares are down 46% since the start of the year.
“WH Smith has become a case study in how quickly a dependable retail business can unravel when trust is shaken. The stationer-turned-travel retailer narrowly missed annual profit expectations, but the more telling development was management’s decision to review parts of its North American business as it continues to mop up the fallout from last year’s accounting errors.
“Exiting the High Street and selling Funky Pigeon to double down on travel retail was a rational response to declining town-centre footfall. Airports and railway stations offer reliable customer footfall, regardless of the economic landscape, as well as strong pricing power. And encouragingly, like-for-like revenue growth of 3% suggests the transition is working for WH Smith, albeit slowly. While guidance for 4–6% total revenue growth into 2026 indicates momentum has not disappeared, markets remain sceptical.
“WH Smiths share price indicates investors are not ready to forgive, particularly with US operations now under review. That review must be swift and thorough. The accounting misstep was a bitter blow to credibility, and credibility is costly to rebuild. WH Smith must prove the error was a one-off, as it surely cannot afford another fiasco.”