WH Smith tries to recover bonuses from ex-bosses as watchdog investigates accounting error

Retailer targets £7m in bonuses as FCA examines scandal in North American arm

WH Smith will try to take back as much as £7m in bonuses from former executives after revealing the UK’s financial watchdog has launched a formal investigation into a devastating accounting error linked to its US business.

Almost £600m was wiped off the books to paperclips retailer’s stock market value overnight in August after it identified errors with accounting for supplier income and provision for lost stock going back to 2023 in its North American arm.

Last month its chief executive, Carl Cowling, stepped down in the wake of the scandal. The company is searching for a permanent replacement.

On Friday the company said it would be “applying malus and clawback to recover overpaid bonuses” from Cowling, and its former finance director Robert Moorhead, after the restatement of profits in its 2023 and 2024 financial year.

Together, Cowling and Moorhead – who left last year – received just over £7m in bonuses and long-term share awards for those years. Cowling took home £4m in bonuses and long-term share incentives over the period, while Moorhead received just under £3m.

It is unclear how much of those bonuses the company will attempt to recover, but it is understood to probably be less than half.

WH Smith said the UK’s Financial Conduct Authority had launched a formal investigation into the company’s compliance with UK listing, disclosure and transparency rules, after it emerged last month it had begun making inquiries.

Andrew Harrison, the retailer’s interim chief executive, said the company had now put in place “a clear remediation plan” to “strengthen governance and controls to protect value and restore trust” supported by new systems.

He said the revamp would cover the whole group, not only the US, overhauling policies and processes, culture, training and oversight.

A review by the advisory company Deloitte partly blamed a “target-led culture” for the accounting issues in North America. Harrison said that while WH Smith would “not shy away from targets”, there would be more room for employees to raise concerns.

He said the group was also simplifying its North American division, exiting about 40 unprofitable fashion and speciality stores, which it runs under brands such as Misura and Marshall Rousso in holiday resorts. It is also reviewing its InMotion technology retail portfolio, potentially exiting about 25 of those 124 outlets. He said it was possible that some stores could be converted to different formats rather than closing.

Harrison said the group would also be reviewing some of its other overseas markets and focusing on franchising in new territories.

“It has been a difficult end to the year for the group,” Harrison said. “The board and I are acutely aware that we have much to do to rebuild confidence in WH Smith and deliver stronger returns as we move forward.”

The comments came as WH Smith revealed that pre-tax profits for the year to August 2025 were just £16m, after £92m of one-off costs, down from £73m a year before. Sales rose 5% to £1.5bn.

Shares in the group fell by more than 5% on Friday morning as it said it expected underlying profits for the year to August 2026 to be £100m-£115m, approximately on a par with this year’s £108m.

Harrison said the company would be investing in its UK airport stores, while trading at its railway station outlets had “softened” as these sites were “more exposed to general consumer sentiment”, which has been weak.

The newspaper, books and stationery chain cut financial forecasts in August and launched an independent review led by Deloitte after it discovered the accounting blunder.

The revelation came only a few months after the group sold its high street business, which has since been rebranded as TGJones by its new owners. WH Smith had identified North America as a growth opportunity in its new focus on its branches in airports and railway stations.

The Deloitte review found profits at the division had been overstated by as much as £50m.

The FCA confirmed on Friday it had opened an investigation into WH Smith.