Profit warnings from FTSE retailers fall in H1

FTSE retailers have issued only 10 profit warnings for the first half of 2023, marking a fall from the 16 warnings issued during the same period in 2022, according to EY-Parthenon’s latest profit warnings report.

Nonetheless, more than a fifth of companies in the ‘three warning danger zone’ came from either FTSE retailers or FTSE personal care, drug and grocery store sectors. 

According to EY-Parthenon, these businesses may find themselves vulnerable if the cost-of-living crisis continues to squeeze consumer incomes and spending.

Overall, it found that companies within consumer staples FTSE sectors, including supermarkets, have seen a “substantial” fall in the number of profit warnings, with only six reported in the first half of 2023, against the 19 recorded in H1 2022.

Silvia Rindone, EY UK&I retail lead, said: “Retailers have enjoyed a relatively positive start to the year, with lower costs also helping companies to meet subdued forecasts. But this could just be the eye of the storm. 

“Energy and food costs are falling, but this release of pressure on disposable incomes is being increasingly offset by increasing rent and mortgage costs. Our latest Future Consumer Index shows UK consumers’ confidence and ability to spend has all but disappeared in the face of these pressures, with 62% of consumers extremely concerned by the cost-of-living crisis and two-thirds (67%) expecting it to get worse over the next six months.” 

She added: “Brands and retailers need to understand the factors influencing their customers and how these make a difference to spending patterns and attitudes. This will help businesses to continuously re-evaluate and simplify ranges and pricing to meet the needs of today’s consumer.”