13 Sep The WH Smith accounting scandal continues
The WH Smith accounting scandal has deepened with revelations that the retailer relies heavily on promotional income from suppliers to meet its sales targets. This involves suppliers paying WH Smith to prominently display or discount their products, with the income treated as revenue; however, experts suggest that WH Smith has prematurely recognised this income, leading to overstated profits.
Poor US performance
Last month, WH Smith’s shares plummeted more than 40% after it announced profits from its North American unit would be £30m below expectations. This sharp drop marked one of the largest single-day declines among UK retailers. Deloitte, the accountancy firm, is currently investigating the issue.
Accountants across the country will be watching. Not far from WH Smith’s Swindon home, for example, Evesham accountants such as https://www.randall-payne.co.uk/services/accountancy/evesham-accountants will no doubt take a keen interest in the unfolding international scandal.
Supplier revenues increase
Supplier income surged from £10m in 2022 to £33m in 2024, raising concerns about over-reliance on such income to boost profits. Retail analysts warn that this mirrors past issues seen in Tesco’s 2014 supplier payment scandal, although WH Smith operates under different regulatory rules.
An uncertain future
WH Smith’s focus has shifted to travel retail after selling its UK high street stores, with North America a key growth market. Despite leadership receiving sizeable bonuses last year, market confidence has been rattled. Deloitte’s investigation findings are expected alongside the company’s November financial results, with profits forecast to be down to £110m from £160m.
WH Smith and its auditors have declined to comment on the ongoing investigation.
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