Image: “WH Smith” by Tiia Monto licensed under CC BY-SA 3.0.
At a glance
- WH Smith overstated earnings by £30m, causing its share price to fall 42%.
- The error may have stemmed from manual processes and/or pressure to meet growth targets.
- To reduce the risk of similar manual errors, automate processes and strengthen reviews.
- Foster a culture where staff feel empowered to raise concerns and question figures.
Like most businesses with a history stretching back more than 200 years, WH Smith has evolved. It started as a news vendor in London’s Little Grosvenor Street, rode the railway boom of the 1800s with station news-stands, and expanded into books and them music retailing through the 1900s.
The 2000s has seen it expand back into transport-related retailing, but this time in airports. In June 2025 it sold its roughly 500 high street shops to focus more intensely on travel retailing at airports and stations, including further expansion in North America. At this point, the market valued it at as much as £1.1 billion.
The WH Smith Error
However, in August it became clear that WH Smith had overstated its North American earnings by £30m, apparently because of timing issues with booking supplier income. Essentially, income that should have been deferred into 2025/26 was booked in the year to August 2025.
In its statement on the issue, WH Smith said its trading profit in the region for the year ending 31 August 2025 would now be about £25m, down from the expected £55m. In response, the group has cut its profit forecasts in North America. Deloitte is carrying out an review. That will reportedly seek to determine, among other things, whether the error is confined to one year’s results. (The company is audited by PwC.)
We should emphasise that the contents of this article are based only on initial reports. We still don’t know the exact chain of events that led to the WH Smith Error.
But we do know that the markets took the WH Smith Error as a significant indicator of trouble with the company’s likely future profits. In the next week, WH Smith’s shares fell 42%, with almost £600m wiped off its market value. At the time of writing, the shares have not substantially recovered. For whatever reason, the share market currently seems convinced that the WH Smith Error has long-term consequences for the value of the business.
A mistake that spirals into a huge fall in market value – it’s the nightmare of many an accounting professional, especially when it delivers a blow to an iconic business like WH Smith.
What lessons should accounting teams take from the WH Smith Error? We spoke to accounting experts to understand what might have gone wrong, and how other accountants can avoid similar issues.
What went wrong?
Iplicit is an fast-growing accounting software solutions provider whose CFO, Rob Steele, needs to have a deep understanding of how financial systems work. At its core, says Steele, WH Smith appears to have had a revenue recognition issue.
Steele suggests that the WH Smith Error was a rather extreme example of the repercussions of getting revenue recognition wrong – and “a real wake-up call for all FDs and accountants.”
A Financial Times article suggests that the issue arose because as a travel retailer, WH Smith relies on high passenger volumes for its low-cost products. The group records income from supplier discounts and incentives based on how much the group buys. In WH Smith’s case, the facts disclosed to date suggested this supplier income may be a very large amount. Just how and when the accounts record this income seems to have been at the root of the WH Smith Error
With footfall dropping just as it expanded into North America, managers may have been feeling the pressure to sustain growth despite falling footfall, leading to optimistic revenue recognition.
It remains unconfirmed by the group, but media reports also suggest that the group was relying heavily on manual processes for its accounting. Hugh O’Neill, chartered accountant and manager of solutions consulting at accounting software provider FloQast, says this suggests an even simpler explanation for the WH Smith Error. It could be a straightforward spreadsheeting mistake that wasn’t picked up in time.
O’Neill notes that accounting teams are under constant pressure to close the books quickly, especially in fast-moving businesses like retail. “When people are working at speed,” he says, “manual tasks become high-risk, and errors slip through.”
Three lessons in prevention
As Steele reiterates, we don’t know for certain how WH Smith’s finance team was managing revenue recognition. However, he adds: “I often see businesses, particularly in the midmarket, trying to manage it using large spreadsheets and manual journals, and that’s where errors creep in.”
Even relatively modest errors in these cases can distort reported results and damage trust and reputation.
To reduce their likelihood, O’Neill adds that an extra layer of human oversight is valuable, rather than relying solely on the CFO’s ‘power sign off’. Having an experienced colleague provide a second opinion, or building in a structured review layer, could have picked up the error.
Finally, it’s possible that leadership wasn’t listening hard enough to its teams. If the group’s people felt that the process was overly manual or too high-risk, they should have been able to say so and be heard. For O’Neill, “many errors don’t come from lack of skill, but from a lack of support and investment in the right tools.”
There are steps many accountants can take to avoid falling into the same traps as WH Smith.
1. Embrace automation
Automating routine postings helps to reduce the risks that come with sprawling spreadsheets, where formula errors or mis-postings are common. It also gives team members time back to spot anomalies. And affordable tools are available that can standardise and streamline revenue recognition.
O’Neill says that using the time that automation saves for oversight is critical. Finance leaders need to be able to step back, interrogate the results and challenge figures that don’t look right. They can’t do this if they’re buried in manual processes.
2. Strengthen review processes
A second opinion from a senior accountant or finance leader often makes all the difference, says O’Neill. For example, many firms require dual sign-off for large supplier rebates or incentives.
“When people are working at speed, manual tasks become high-risk, and errors slip through.”
Hugh O’Neill, chartered accountant and Manager, Solutions consulting, FloQast
This process helps verify that the timing of recognition is correct and that the income is properly classified, reducing the risk of errors or misstatements. It can also provide an extra layer of assurance and strengthen overall financial governance.
3. Invest in culture, as much as systems
Misstatements often occur not because no one spotted the issue, but because no one felt empowered to raise it. For O’Neill, “finance professionals must feel able to ask questions and flag uncertainty without fear.”
Leadership should actively encourage open dialogue, especially in global organisations where teams work across different time zones. “Clear communication and unified processes are vital when judgement calls on timing can materially shift reported earnings.”
Standing by
At time of writing, WH Smith was standing by its CEO, but otherwise staying quiet and waiting for the results of Deloitte’s review. Current reports suggest that review will arrive before the end of October 2025. Meanwhile, many accountants will wonder: “Could I have made the same mistake?”
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