Carl Cowling has stepped down as chief executive of WH Smith following an investigation into an accounting error within its US division, as the retailer issued a fresh profit warning.
The departure comes after an independent review conducted by Deloitte uncovered "shortcomings" that led the group to overstate profits in its American business by as much as £50 million.
Andrew Harrison, who currently heads the group’s UK division, has been appointed on an interim basis while a permanent successor is sought. WH Smith now anticipates profits from its US operations for the delayed full-year results to fall between £5 million and £15 million. This figure represents a significant reduction from the initial market expectation of £55 million and the revised guidance of £25 million issued when the accounting issue first emerged.
Profits for the wider group are now expected to be between £100 million to £110 million for the year to August 31, which is lower than the £110 million in its previous earnings downgrade.
WH Smith chairwoman Annette Court said: “This is an extremely serious matter that has had the board’s full attention and we sincerely apologise for the shortcomings identified.
“While the issues identified arose in our North America division, we recognise the importance of strengthening controls, governance and reporting procedures across the group.
“We have acted swiftly to build a comprehensive remediation plan and will reinforce the financial discipline and integrity that underpin our business moving forward.
“Our priority now is to rebuild trust and credibility, and to improve the performance and profitability of our North America division.”
It brings to an abrupt end Mr Cowling’s six-year tenure at the helm and his 11-year career at the company.
He 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 chief executive feel it is only right that I step down from my position.”
WH Smith said in October it was delaying full-year results by more than a month due to the US accounting issue and Deloitte review.
Figures for the year to August 31 had been due on November 12, but are now expected to be published on December 16.
Deloitte’s review found issues with the accounting treatment for supplier income in the US, which it said had “arisen against a backdrop of a target-driven performance culture and decentralised divisional structure combined with a limited level of group oversight of the finance processes in North America”.
It also said there were weaknesses in the make-up of the US finance team and “insufficient systems, controls and review procedures for supplier income across commercial and finance functions”.
WH Smith appointed a new chief executive for the US business in June and is reviewing the wider North America leadership team as part of a recovery plan, which is being monitored by the board.
WH Smith is now focused solely on its 1,300 shops in global travel locations – such as in airports, train stations and hospitals – after it sold its high street chain of about 480 shops to Hobbycraft owner Modella Capital in June.
As part of the deal, the WH Smith name is disappearing from British high streets and being replaced by brand TGJones.
WH Smith boss steps down after US accounting probe
Ocado sees shares plummet after blow from Kroger site closures
Kate joins business leaders for summit on early years development of children
Crest Nicholson shutting office and axing jobs as it warns over profits
UK inflation falls in pre-Budget boost Rachel Reeves
Adverts for Booking.com and three major hotel chains banned over misleading prices
