Profit warn­ings rise as the high street suf­fers

The Sunday Telegraph - Money & Business - - Business - By Tim Wal­lace

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’

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