Figures show 'rising uncertainty'

Retail woes add to growing pile of profit warnings

Quiz girl

Quiz Clothing was among the firms to warn on profits


Britain’s quoted companies last year issued the second highest number of profit warnings since the crash in 2008 as the downturn on the high street and growing uncertainty took their toll.

One in six (16.8%) listed firms reported lower earnings, just below 17.7% ten years earlier. Share prices in these companies fell by a record average of 22.6% in the final quarter of 2018, just topping the previous peak of 22.5% in Q3 2008.

There were 287 profit warnings, a rise of 4% year-on-year, according to EY research, with retailers (36) dominating the list, followed by travel & leisure (29), support services (27) and software & computer services (23).

Retailers included Dixon Carphone, Moss Bros and Sports Direct. Troubled department store chain Debenhams issued three warnings. Other high profile firms included the airline Flybe and postal service Royal Mail.

In the last quarter of 2018, FTSE general retailers issued eight profit warnings, taking the 2018 total to 36 – a 50% year-on-year increase. Last year, 38% of the sector issued a warning, the highest level since 2008.

There were 14 profit warnings by Scottish listed companies, against 13 in 2017. They included another retailer, Quiz Clothing, which saw its concessions hit by the collapse of House of Fraser into administration. This month it issued a second warning. Energy firm SSE and the five-a-side football operator Goals also warned of lower profits.

EY found that 74% of companies issuing profit warnings in Q4 2018 hadn’t warned in the last year. This was the highest proportion of ‘new’ companies warning in more than eight years – significantly more than 52% in Q1 2018. 

Colin Dempster, EY’s head of restructuring in Scotland, 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. 

“Investors, like many businesses, are positioning for the worst – which could provide some upside to 2019. Recent events have created further political and economic uncertainty and there is no let-up in the pace of structural change.

“A combination of a relentless margin squeeze, the increasing average cost of getting product in front of and to the consumer, the continuous need for reinvention and falling consumer confidence made 2018 an exceptionally tough year for the retail sector.”

In 2018, 50% of profit warnings cited weaker consumer confidence, up from 25% in 2017, which has spread profit warnings into previous growth areas, such as online. 

Mr Dempster added: “What happens next depends on how much more unpredictable 2019 becomes. Markets adjust quickly to new realities and recent falls in consensus expectations suggest that much of UK plc has a difficult year ahead factored into their forecasts. 

“However, in this fast-moving world companies need to keep moving forward or risk finding themselves on the wrong side of sector trends, potentially triggering a new cycle of profit warnings in years to come.”


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