Profit warnings by UK retailers at the highest level since Global Financial Crisis

Michael O'Dwyer
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Department store Debenhams announced store closures as high street retailers faced difficult conditions in 2018 (Source: Getty)

The number of UK retailers issuing profit warnings reached a ten year high last year as the sector endured a torrid twelve months, according to data from accounting giant EY.

Data showed that 38 per cent of FTSE general retailers issued profit warnings in 2018, a 50 per cent increase on the previous year and the highest number since 2008, said the EY profit warnings report.

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Half of the profit warnings cited weaker consumer confidence, up from a quarter in 2017.

Alan Hudson, EY’s head of restructuring for UK & Ireland said: “A combination of a relentless margin squeeze, the continuous need for reinvention and falling consumer confidence made 2018 an exceptionally tough year for the retail sector.”

The report also flagged continued high levels of occupancy at prime retail locations and warned that “there is only one direction of travel and changing customer behaviour will continue to challenge retail landlords in 2019”.

Last year also saw the second highest number of profit warnings (287) by UK listed companies across all sectors since 2008, with one in six quoted companies issuing a warning.

In the three months to the end of December, EY recorded 88 warnings, nine per cent more than in the same quarter in 2017 and the highest fourth quarter total since 2015.

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The report also found that 74 per cent of warnings in the final quarter of 2018 came from ‘new’ companies - companies which have not issued a warning in the previous 12 months - the highest proportion in a single quarter for over eight years.

Hudson said: “It is particularly significant that we have seen more ‘new’ companies warning in 2018. It demonstrates that there are more wide-reaching pressures at work, namely the impact of rising uncertainty on confidence and demand, contributing to a wider spread of profit warnings.”