WH Smith boss takes aim at years of ‘forced growth’ as profits plunge

WH Smith has revealed annual profits tumbling by nearly a third but said it was ramping up turnaround efforts as part of a “fundamental reset” of the group.

Its new boss, executive chairman Leo Quinn, who took on the top job in April, blamed “forced growth” in past years for leaving the group with increasing costs and “too many loss-making stores”.

Under Mr Quinn’s leadership, WH Smith is now accelerating an overhaul kicked off at the end of last year after a major accounting error in its US division which sent its shares plunging amid a raft of profit warnings and sparked an investigation by the Financial Conduct Authority (FCA).

The firm raised £103 million in June through an equity raise to bolster its balance sheet and help drive investment plans.

Latest annual results show a 30% drop in underlying pre-tax profits to £76 million for the year to August 31, despite like-for-like revenues rising 2%.

On a statutory basis, the group swung to a £107 million pre-tax loss from £2 million in profits as it was hit by impairments, write-downs and restructure costs totalling £164 million.

Mr Quinn said the group had launched a “fundamental reset” over the past year to reverse its fortunes.

He said: “Over the last few months, we have undertaken a detailed analysis of the group’s strategy and recent historical performance.

“It is clear from this that forced growth delivered a complex and siloed group structure without scalable benefits.

“This resulted in increased costs, too many loss-making stores, acquisitions not integrated effectively and high organisational complexity.”

The group said the overhaul cost it £41 million in the past financial year as it looks to overhaul its US store base and scale back its other international operations to focus on three countries – Ireland, Spain and Australia.

It has not said how much will be saved in annual costs from the turnaround and it has not revealed if there will be any impact on jobs.

The group sold its UK high street shops to private equity firm Modella Capital last year to focus on its chain based largely at travel locations in Britain and globally.

WH Smith said it is on track with expectations for underlying pre-tax profits of between £75 million to £85 million in 2026-27, but said it “continues to plan cautiously given the ongoing macroeconomic uncertainty”.

Shares fell 7% in morning trading on Thursday.