Shares in WH Smith PLC (LSE:SMWH) tumbled over 30% after the company warned that profits for its current financial year will be £30 million lower than current market expectations, as it had over-inflated North American profit by booking supplier rebates early.
The FTSE 250 group said it has asked accountants Deloitte to carry out a "comprehensive review" after the amount of headline trading profit was overstated due to "accelerated recognition of supplier income".
These supplier incentives and discounts, which should have been accrued over time as a reduction in cost of sales, were booked too early, inflating divisional performance.
The accounting irregularity, discovered as the retailer prepared its results for the financial year to 31 August, means headline trading profit from the North America division will now be around £25 million, down from previous market expectations of approximately £55 million.
Full-year headline profit before tax and non-underlying items are now expected to be "in the region of £110 million", it said, promising a further update at its preliminary results announcement, likely to be in November.
The shares fell 33% to 741.43p, the lowest since the first days of the UK pandemic lockdown.
** Update: Adds share price reaction **