The boss of WH Smith has resigned with immediate effect after an accounting failure prompted the retailer to slash its profit forecasts.
WH Smith said that Carl Cowling, its chief executive of six years who had presided over the sale of the company’s UK high street business earlier this year, offered to go after an independent review into an overstatement of earnings revealed in August.
Experts from Deloitte found WH Smith’s North America division – its key area for growth – had been recognising supplier income incorrectly.
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It identified weaknesses in the composition of the North America finance team, WH Smith said, along with insufficient systems, controls and review procedures.
The company said that, as a result, it now expected group headline trading profit for its financial year of between £100m-£110m, down nearly 55% on the previous 12 months.
Profit in North America was forecast to fall to between £5m-£15m – down sharply on the £55m forecast before the accounting errors were first flagged.
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The company apologised for the shortcomings, which had resulted in a drop in its share price of almost 50% since August.
The board, WH Smith said, was focused on rebuilding trust and profitability.
Andrew Harrison, head of WH Smith’s UK division, will act as interim CEO.
Shares rose by more than 4% during morning trade as investors digested the company’s update.
Mr Cowling said of his departure: “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.
“It has been a privilege to lead WH Smith for the past six years as CEO.
“During this time, we have guided the Company through the unprecedented challenges of the pandemic, pioneered our highly successful one-stop-shop for travel essentials, and completed the divestment of our High Street and online businesses.
“I would like to thank the entire team for their support, and I wish them well.”.
Commenting on the turmoil at the company Dan Coatsworth, head of markets at AJ Bell, said: “No chief executive is going to survive an episode as catastrophic as the one that wiped £594m off the value of WH Smith.
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“Carl Cowling was clinging on to his job the second WH Smith announced an accounting setback in the summer, and now he’s done the decent thing and stepped down.
“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.”
