“High number” of retailers issuing profit warnings

Profit warnings

A “high number” of retailers issued profit warnings in the three months to June, according to a new study from advisory group EY.

The number of profit warnings issued by businesses fell overall in the period, but retailers were revealed to have issued the most.

Forty-five profit warnings were issued over the quarter, marking a 40 per cent decline from the previous quarter, the largest decline since 2009. According to EY, seven of those came from retailers.

A fifth of the profit warnings across all sectors were blamed on international factors, and another fifth blamed contract delays or cancellations.

“A high number of general retailers‘ warnings is a red flag for the rest of the economy,” EY‘s head of restructuring Alan Hudson said.

READ MORE:  Retail profit warnings reach highest number in 5 years

“It reflects weaker consumer confidence, a return to squeezed disposable incomes and rising concerns over the level of consumer borrowing.

“A low level of profit warnings should not lead to complacency. The reality in the market is that earnings forecasts have dipped and the economy‘s relative outperformance has enabled more companies to meet already low expectations.

“Profit warnings may not rise dramatically without a shock, given that companies seem to have come to terms with passing a lower bar; but trickier conditions will catch out more companies and expose any weaknesses.”

Behind the retail sector was software and computer service companies and service sector business, both issuing six profits warnings in the quarter.

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