Nearly half of FTSE retailers issued profit warnings in 2022
The report discovered that over a third (36%) of UK-listed companies in consumer sectors issued profit warnings during the year
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Profit warnings from UK-listed retailers increased by 48% in 2022 as rising costs prompted record levels of warnings, according to EY-Parthenon’s latest Profit Warnings report.
The total profit warnings issued in 2022 increased by 50%, from 203 the previous year to 305 this year.
The report discovered that over a third (36%) of UK-listed companies in consumer sectors issued profit warnings during the year, which totalled 305 warnings by the end of 2022.
Half of the warnings issued in 2022 were due to rising costs, double the share in 2021.
During the year, 17.7% of the UK’s 1,193 listed businesses issued a profit warning, equal to the proportion of companies that issued warnings during the global financial crisis in 2008.
Meanwhile, in the second half of 2022, 169 warnings were issued, which is the highest second-half total since 2015. In Q4 2022, 83 profit warnings were issued, 41% of which cited rising costs, while 24% were due to delayed or cancelled contracts, and 20% due to weaker consumer confidence.
In total, retailers issued the highest amount fo warnings at 36, followed by travel and leisure groups at 25.
Jo Robinson, EY-Parthenon partner, said: “2022 was a challenging year for UK companies. We are now seeing stress deepen and spread into other areas of the economy, such as industrial sectors, which saw the biggest rise in profit warnings in Q4. Cost pressures are passing through supply chains, business confidence is weak, and credit markets are tightening.”
Sam Woodward, turnaround and restructuring strategy partner at EY, said: “Although festive trading was better than expected for many businesses, the bar was set low by exceptional levels of consumer sector profit warnings in 2022.
“Supermarkets appear to have been the main winners of Christmas 2022, while many omnichannel retailers managed to flex their offering to adapt to the impact of industrial action and performed well. However, it will be critical for companies to keep adapting and reflecting customer priorities.”
He added: “The challenges for food producers don’t look set to ease significantly in 2023. It is vital that companies focus their efforts on products that match consumers’ new priorities and look at holistic cost reduction to address input and labour cost issues.”
