The board of WH Smith is standing by CEO Carl Cowling as the business waits for the findings of a probe into a profit overstatement, which caught investors off guard and took over £500m off its market value.
According to three people close to the matter, the retailer expects that the investigation by accounting firm Deloitte will take between six and eight weeks, the Financial Times has reported.
Last week, WHSmith revealed that a routine financial year-end review found that it had been booking supplier income prematurely, leading to an estimated profit overstatement of £30m.
The business expects the problems, which people close to WHSmith think are confined to its US travel arm, are set to lower group pre-tax profits to £110m for the year ended 31 August.
Related Story
Deloitte is looking into whether the mistake solely relates to last year’s accounts or whether profits during previous years may have also been increased.
Two sources close to WHSmith and Cowling maintained the board’s backing for now, highlighting that the brand had a record of steady succession planning.
The retailer’s biggest investor Causeway Capital boosted its stake in the business from 12% to 15.7%, stock exchange filings revealed.
It comes after WHSmith sold its UK high street business to Hobbycraft owner Modella Capital for £76m earlier this year, as it pivoted to focus solely on its travel retail division.
The deal saw the retailer‘s 480 high street stores transition to new ownership under Modella.
The stores operated under the WHSmith brand for a short transitional period before rebranding as TGJones.
WH Smith has been approached for comment.
Click here to sign up to Retail Gazette‘s free daily email newsletter
