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Tough retail conditions haven’t clobbered FTSE 250 stock WH Smith (LSE:SMWH) in 2025. Instead, a major accounting error has sent the 233-year-old firm’s shares into freefall.
Few things can shred investor confidence like irregularities in a company’s books. Unfortunately, a pre-Christmas update from the battered retailer suggested the intrigue will run into the New Year.
But let’s pull back for a second. Having fallen 45% since 1 January, WH Smith shares now trade on a forward price-to-earnings (P/E) ratio of 9.6 times.
That’s below the bargain watermark of 10, and is so low I’m wondering whether it could provide the bedrock for a miraculous recovery in 2026 if value investors step in. Could Smiths really pull off a stunning recovery in the New Year?
Great moves
2025 has proved a transformative year for WH Smith, the company finally hiving off its stricken high street operation to Modella Capital in March. It also sold its funkypigeon.com unit to Card Factory a few months later.
Shareholders cheered the moves, which leave the company with just its high-flying travel business. As analyst Mark Crouch of eToro notes, “airports and railway stations offer reliable customer footfall, regardless of the economic landscape, as well as strong pricing power“.
This narrowed focus has helped Smiths navigate the worst of the retail sector’s recent downturn. Like-for-like sales were up 5% in the last financial year (to August 2025), and the company expects headline revenue growth of 4% to 6% this year.
Chaos drags on
Yet the accounting scandal continues to overshadow the company’s good work elsewhere. And it threatens to drag well into the New Year.
Smiths’ share price slumped in August after it announced some income had been booked prematurely, causing it to overstate profits by roughly £30m. It led to the delay of full-year results being published — not once, but twice — and the departure of chief executive Chris Cowling last month.
The scale of the chaos means even the most enthusiastic dip buyers have steered clear of the company. News last week (19 December) that the Financial Conduct Authority (FCA) is investigating the accounting faux pas hasn’t helped matters, pushing the retailer’s shares lower again.
Can WH Smith rebound?
I’ve long been a fan of WH Smith, but events in 2025 have (perhaps unsurprisingly) knocked my confidence in the company for six.
It’s not just the accounting problems themselves that I’m concerned about. The company is now reviewing its US operations in the wake of the scandal, adding another layer of uncertainty.
Given that the US is a key plank of Smiths’ growth strategy — and the business is facing these problems still without a permanent CEO in place — the company’s investment case now looks incredibly shaky to me.
It’s quite possible the business will bounce back strongly from its current woes. It’s certainly well placed to exploit a predicted sharp rise in global passenger numbers — Airports Council International (ACI) thinks total passenger traffic will rise by at least 2.5bn between now and 2030.
I won’t be adding WH Smith shares to my own portfolio. However, for more adventurous investors seeking a potential recovery hero at rock-bottom prices, the FTSE 250 company’s may be worth serious consideration.
