Profit warnings rise as the high street suffers
A FLURRY of profit warnings from embattled retailers has made it the worst period for the high street since the financial crisis.
The industry was the hardest hit during a wave of earnings downgrades over the past year which indicates that the improving outlook for growth and wages is not being felt in all corners of the economy.
Retailers issued eight profit warnings in the past three months, according to EY, the joint highest thirdquarter figure since the credit crunch.
It comes after a tough year for the high street which has seen companies including Maplin and Toys R Us collapse. House of Fraser was taken over by Sports Direct while Debenhams is selling its Danish operations to raise funds, and New Look closed scores of stores under a CVA.
In total 206 listed companies have issued profit warnings in the past 12 months, up from 191 a year ago.
General retail accounted for the largest proportion of warnings by this sector, but other industries are now catching up.
Seven travel and leisure companies issued warnings as seven support services firms and six in finance.
Profit warnings are having an unusually large impact on share prices, indicating investors have been taken by surprise by the scale of the changes.
The average stock fell 21pc when hit by a warning, the biggest fall in a decade.
The Christmas shopping season will be even more vital for retailers this year. according to Alan Hudson, EY’S head of restructuring in the UK and Ireland.
“Looking ahead we anticipate one of the most demanding ‘golden’ quarters leading up to Christmas trading in many years,” said Hudson. “If 2018 follows the pattern of recent years, consumers will hold back spending from now until Black Friday, which could result in heavy discounting to drive sales.”
Online sales now account for around 18pc of all retail spending in the UK.
‘If 2018 follows the recent pattern, consumers will now hold back spending until Black Friday’