41% of FTSE retailers issued profit warnings in past 12 months, EY finds

A “continued strain” on disposable income amid the cost-of-living crisis has seen 41% of FTSE retailers issue a profit warning over the past 12 months, EY has found.

According to EY-Parthenon’s latest Profit Warnings report, UK-listed companies in the FTSE Retailers sector issued seven profit warnings in Q1 2024, twice the amount reported the prior year.

Overall, nearly one-in-five UK-listed companies issued a profit warning in the last 12 months, according to the firm. Across all sectors, the number of profit warnings issued fell 7% year-on-year to 70 in Q1 2024 and dropped slightly from Q4 2023, when 77 warnings were issued. 

However, despite the quarterly fall in warnings, the number of companies warning for the first time in 12 months reached its highest level since Q1 2022, with 61% of companies in Q1 2024 issuing a ‘new’ warning.

By the end of the first quarter of 2024, 39 companies had issued three or more warnings over the last 12 months, with just over a fifth of these companies delisting, or in the process of doing so, due to insolvency or acquisition.

The wider FTSE Consumer Discretionary group of companies issued the highest number of profit warnings in Q1 with 24 warnings, accounting for 34% of all warnings during the period. 

The biggest growth in warnings was seen in FTSE Personal Goods, where over 50% of the sector issued a warning in Q1 alone. Companies within the sector issued five warnings over the period, the highest number since the pandemic. In the last 12 months, two-thirds of the sector has issued a profit warning, compared with a third at the end of 2023.

According to EY, this increase reflects the “spread of earnings pressures” into the luxury goods sector and ongoing pressure on semi-durable goods, such as clothing, footwear and jewellery. 

Elsewhere, the FTSE Industrial Support Services sector, encompassing business service providers, industrial suppliers, and recruitment companies, issued nine warnings in Q1 and 18 warnings in the last six months, more than the whole of 2022, with the sector “significantly impacted” by falling business spending and recruitment, rising costs, and cancelled or amended contracts.

Meanwhile, companies in financial services sectors reported 11 warnings in Q1, the highest number since the pandemic, and before that, the Global Financial Crisis in 2008. EY said the increase in warnings indicates challenges facing pockets of the financial industry, namely certain lenders exposed to auto finance and some parts of the wealth and asset management industry.