Retail profit warnings ‘exceptionally high’ in 2019
Written by Hannah McGrath
The number of profit warnings issued by UK companies hit an “exceptionally high” level in 2019, with a third of FTSE-listed retailers raising the alarm, according to EY.
The quarterly profit warnings report from the professional services firm found that a total of 313 warnings were issued by FTSE-listed companies in 2019, up nine per cent on the 287 issued in 2018.
The volume of warnings among quoted companies was the highest since 2015, with 17.8 per cent of all companies raising the alarm in 2019, narrowly up on the 17.7 per cent of companies to issue a warning in 2008, in the midst of the financial crisis.
Last year brought more misery for the UK High Street, with retailers hit by falling footfall, rising business rates and challenging Christmas trade. Delayed decision-making due to Brexit-related political uncertainty also put the brakes on consumer spending.
For the second year in a row, a third or more of the FTSE retailers issued a profit warning, despite disposable incomes rising over the last 12 months.
Retail was the hardest hit sector overall, issuing the most warnings in 2019 (32), followed by support services and software services, which both issued 25 warnings.
However, the number of profit warnings from retailers fell last year from 36 in 2018 to 32 in 2019, with just four warnings issued in the final quarter of the year. EY said this marginal improvement came on the back of a “bruising period of profit warnings and sector restructuring, that has led to a widespread downgrade of profit expectations”.
Retailers had already equalled the fourth quarter of 2019’s total of warnings by mid-January 2020, underlining the ongoing challenge.
Lisa Ashe, restructuring partner at EY, said: “Weak consumer confidence, rising costs and intense promotional activity have created an exceptionally tough climate for retailers, who face an additional race to adapt to rapidly changing shopping habits.
“Post-Christmas trading updates once again underlined the stark contrast between the retailers that are creating a compelling, engaging online and store offering, and those who have fallen behind.”