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Retail profit warnings surge in 2011


The number of retailers reporting profits warnings in the first half of this year has already well surpassed the total for 2010, new analysis shows.

In the year to date, public listed retailers have issued 26 warnings that profits will be lower than anticipated, compared to last year when 18 warnings were posted and 2009 which saw 14.

Big name retailers such as Dixons Retail, HMV and Carpetright have been amongst the bearers of bad news this year, as consumer spending remains worryingly low due to high inflation and low pay deals.

Professional services firm Ernst & Young, which conducted the research, warns that with profit expectations lowered, struggling retail firms may find it even more difficult to capitalise on any improvement to consumer sentiment later in the year.

Adam Hudson, Ernst & Young’s Head of Restructuring, said: “They will find it very hard to make enough cash to invest in Christmas. If retailers can’t get the inventory, they won’t make money.”

“Some of them only really make money at Christmas.”

The squeezed nature of the industry has led to some high profile casualties, with Focus DIY, Habitat and Jane Norman all falling into administration in just the last few months.

With these very public failures widely reported, the worry for many retailers is that worried suppliers might cut back their lines of credit to struggling retailers to limit their liabilities.

Hudson added: “We will continue to see a shakeout of those struggling with rising costs, wage inflation and falling consumer spending.”

Published on Monday 11 July by Editorial Assistant

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