Two out of five FTSE retailers sounded profit warnings in 2023 as high interest rates and wavering consumer confidence placed pressure on margins.
According to EY-Parthenon’s latest Profit Warning report, 40% of FTSE retailers issued a total of 24 warnings last year, however this was a third fewer than the 36 issued in 2022.
Profit warnings fell year-on-year at the start of 2023 but surged in the final quarter, with nine listed retailers issuing warnings – the same number as those in 2022.
Out of those, more than half (5) came from fashion retailers blaming ongoing concerns about inflation, high interest rates and high energy costs placing pressure on discretionary spending.
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Profit warnings issued by the FTSE personal care, drug and grocery stores sector dropped from 16 in 2022 to just three last year thanks to a 6.8% bump in food sales over the golden quarter.
Overall, profit downgrades in the FTSE fell 11% last year, with 294 warnings issued from 2022’s record 305.
However, the percentage of companies warning was still exceptionally high at 18.2%, higher than 17.7% at the peak of the global financial crisis in 2008.
EY UK and Ireland retail lead Silvia Rindone said: “Despite the easing strain on disposable incomes, consumers are maintaining discretion when it comes to retail purchases.
“While household income is expected to comfortably outpace inflation in 2024, consumers are still under significant pressure after a year of prices rising quicker than wages.
“Cost pressures remain relatively high for retailers, with further challenges set to arise in April with the proposed increase in business rates and the impact of ongoing geopolitical disruption on supply chains.”
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