Profit warnings from FTSE listed retailers double

profit warnings

Profit warnings by FTSE-listed retailers listed have doubled in a year, as the sector is strained by rising costs and a squeeze on consumer spending.

According to research from EY, there were 20 profit warnings from listed retailers in the first half of 2018, double the number issued in the same half-year period in 2017.

Retailers such as Debenhams, Moss Bros, Carpetright, John Lewis, Eve Sleep, Dunelm and Card Factory are among those who have so far issued profit warnings this year.

The distress in the sector has triggered a number of administrations and CVAs, an insolvency procedure that allows the business to operate as usual while undergoing a major restructure featuring rent reductions, store closures and job cuts in order to save it.

Meanwhile, non-listed retailers such as New Look and House of Fraser have also pushed ahead with CVAs.

In its report, EY said rising operational costs from labour, business rates and the switch to online shopping were all straining retailers.

EY added that CVAs were “just one part of the solution” for distressed retailers.

“To stay in this ever-changing game, retailers will need to invest more and take more risks. But many lack the capital and wherewithal to move forward,” EY said.

“Thus, we expect to see a continuing divergence of fortunes in 2018, especially if landlords continue to toughen their stance on CVAs.

“Most well-planned and structured CVAs should get approval; but landlords are starting to take a tougher stance and there are few levers left for retailers to pull.

“Securing funding and credit insurance look increasingly problematic.”

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