Monday, September 25, 2017

Retail profit warnings reach highest number in 5 years

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Profit warnings in the retail sector have reached their highest level in five years, according to accountancy firm EY.

The high street price war is beginning to take its toll on retailers, as nine profits warnings for the third quarter on the UK stock exchange have been issued, the highest number since 2011.

Despite sales still rising, keeping prices low to remain competitive has been a key issue for retailers adding further pressure to margins following the collapse of the pound.

Brexit however, was not the key driver of profit warnings this summer. Unseasonal weather seeing a colder start and a warmer end to the season damaged sales of unsuspecting retailers, especially in the fashion sector.


READ MORE: Intensifying price war drives down average basket prices by 3%


The recent effects of the diminished buying value of the sterling add to the pressure, with EY stating that these effects will be felt more strongly next year, as currency hedges designed to protect firms against currency swings expire.

“The impact of the weakened pound may be delayed by currency hedges, but at some point something will have to give at the till or further down the supply chain,” EY head of retail restructuring Jessica Clayton said.

Of the 68 companies who issued profit warnings during the third quarter, nearly a third of them were blamed the pound for their financial struggles.

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