UK/INTERNATIONAL. WHSmith Group CEO Carl Cowling has stepped down with immediate effect following a review into an accounting error related to the travel retailer’s profitability in North America.
His duties will be fulfilled on an interim basis by Andrew Harrison, CEO of WHSmith’s UK division, while a formal search for a permanent CEO is launched.
On 21 August, the company said it had identified an overstatement of around £30 million (US$40 million) of expected headline trading profit in North America, as it prepared year-end results for the financial year ending 31 August.
The company announced an independent review by consulting firm Deloitte, which found that the accounting treatment for supplier income adopted by the North America division was not consistent with the group’s stated accounting policy. This led to an overstatement in supplier income recognition in North America.
In a statement today (19 November), WHSmith said: “The North America supplier income issue has arisen against a backdrop of a target-driven performance culture and decentralised divisional structure combined with a limited level of group oversight of the finance processes in North America.
“The following factors in North America also contributed: weaknesses in the composition of the finance team; and insufficient systems, controls and review procedures for supplier income across commercial and finance functions.”
Following the review’s completion, Cowling offered his resignation as CEO and as a director, which the board accepted, though he will remain employed until 28 February 2026 to ensure an orderly handover of his duties. He led the company as Group CEO since November 2019 having joined in 2014.
Elaborating on the supplier income issue, WHSmith said the overstatement in the North America division was “substantially a timing rather than an existence issue, and relates to the application of accounting standards”.
It added that the methodology and conclusion of the Internal Audit review of supplier income for FY25 across the UK and Rest of the World Travel divisions “is appropriate and supplier income has been appropriately recognised in these divisions”.
In North America, headline trading profit for the financial year is expected to be in the range of £5-£15 million (US$6.5-US$19.7 million) – and around £100-£110 million (US$131.2-US$144.4 million) at group level – down from the revised expectation of around £25 million (US$32.8 million) for the region announced on 21 August and previous market expectations of £55 million (US$72.3 million).
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The revision from the previous market expectation of £55 million includes:
- A net reduction in supplier income of around £22 million (US$28.9 million). This comprises a gross reduction of £32 million (US$42 million) of which £20 million (US$26.2 million) is deferred to future financial years and £12 million (US$15.7 million) has not been delivered due to delays in signing supplier income contracts and the under delivery of the commercial plan. Supplier income costs of around £3 million (US$3.9 million) have also been incurred.
- These costs are offset by a potential £13 million (US$17 million) supplier income restatement benefit from prior years.
- Additional one-off costs in the region of £20 million relating to inventory.
- Expected cost savings of around £5 million (US$6.6 million) not delivered in FY25, largely relating to the delayed restructure of the North America logistics and distribution network.
Supplier income adjustments on a net basis for the prior years are expected to be around £13 million for FY24 and £5 million for FY23. About £5 million of supplier income from these prior years will be recognised in FY26 and beyond.
Remediation actions
WHSmith appointed a new CEO for the North America division in June and said it is reviewing the North America leadership team. The company said it has taken steps to strengthen its Group Finance and Audit and Risk teams. In addition, it is developing “a robust remediation plan” that includes:
- North America division adoption of the global supplier income policy, new governance and controls frameworks and refreshed mandatory training;
- Group-wide implementation of a new supplier income management system accelerated to early 2026;
- Finance Transformation programme approved by the board to enhance systems, processes, controls and centralise group finance oversight;
- The intention to engage a third-party assurance provider to support internal audit to review and validate key financial controls and processes;
- Strengthening the board, including additional North America retail expertise; and
- A commitment to “fostering a culture of integrity, transparency and accountability; and empowering teams to speak up and embed responsibility at every level”.
As a result of the review conducted to date, fees of up to £10 million (US$13.1 million) within non-underlying costs in FY25 are anticipated. More details on future remediation costs will appear in its preliminary results on 16 December.
WHSmith Chair Annette Court said: “This is an extremely serious matter that has had the board’s full attention, and we sincerely apologise for the shortcomings identified. While the issues identified arose in our North America division, we recognise the importance of strengthening controls, governance and reporting procedures across the group.
“We have acted swiftly to build a comprehensive remediation plan and will reinforce the financial discipline and integrity that underpin our business moving forward.
“Our priority now is to rebuild trust and credibility and to improve the performance and profitability of our North America division. We are confident that the actions we have taken and will continue to implement over the months ahead will ensure a strong foundation for the business going forward.”
On Cowling’s resignation, Court said: “On behalf of the company and the board, I would like to thank Carl for his significant contribution to WHSmith over the last 11 years. Upon being appointed as Group CEO in November 2019, Carl successfully navigated the company through the global pandemic and, more recently, has strategically repositioned the group as a pure-play travel retailer. We wish Carl every success in the future.
“I am pleased that Andrew has agreed to accept the position of Interim CEO. Andrew will join the board with immediate effect. With the support of an external executive search firm, the board is now committed to appointing the strongest candidate to lead the next phase and guide the group’s long-term growth strategy.”
Cowling added, “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 WHSmith 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.”
Harrison commented: “Our immediate priority is to maintain a relentless focus on operational excellence and execute the remediation plan with discipline. We have a very resilient business and the fundamentals are strong. Working alongside Max Izzard, Group CFO, I am confident that we can move forward and position the group for long-term growth and success.”
Harrison joined WHSmith as Managing Director for the UK Travel division in May 2021. He previously spent 15 years with Manchester Airports Group where he held various roles, including Commercial Director and Managing Director of Manchester Airport, Managing Director of Stansted Airport, Chief Operating Officer and Chief Strategy Officer. ✈
