WH Smith has been hit hard after discovering a major accounting mistake in its North American business, forcing the retailer to slash its profit forecast and sending its shares crashing by more

than 30% on Thursday.

The company revealed that earnings in the U.S. and Canada had been overstated by about £30 million ($40 million), largely because supplier income was booked too early. As a result, profit expectations for its North American arm have been cut to about £25 million—less than half of the £55 million originally forecast.

The news has rattled investors. “This is clearly a big negative surprise,” analysts at JPMorgan warned, adding that concerns over WH Smith’s accounting could weigh on the stock for some time.

To calm nerves, the company has brought in Deloitte to conduct an independent review of its books.

The shock pushed WH Smith shares to their lowest level since the pandemic-hit days of March 2020, making them the biggest fallers on the FTSE mid-cap index.

The timing couldn’t be worse for the retailer. WH Smith recently sold off its traditional UK high street stores to focus entirely on travel retail, betting big on airport and railway locations. North America has been a major growth market, making up around 20% of group sales last year. But the division is now under a cloud, while rising debt and a tough global travel market are already pressuring the company’s finances.

For the year ending August 31, WH Smith now expects pre-tax profit to come in at about £110 million—well below the nearly £157 million analysts had penciled in. Back in April, the company had been guiding toward almost £183 million. Photo by Tiia Monto, Wikimedia commons.