Retailer profit warnings nearly double in Q3

Profit warnings issued by listed retailers in Q3 have almost doubled against the prior year, according to a new report from EY-Parthenon.Over the period, listed retailers issued nine profit warnings, the highest level since Q4 2023. Over half (56%) of these warnings cited weakened consumer confidence as a driving factor.

According to EY, the listed retail sector, which includes companies from the FTSE Retailers and FTSE Personal Care, Drug and Grocery Stores sectors, was “particularly vulnerable” amid “more selective” consumer spending. 

The report highlighted challenges facing listed companies in these sectors, including delayed purchases and a shift towards lower-cost options, in part driven by rising costs and “evolving consumer preferences”.

Across the wider market, companies in the Consumer Discretionary and Consumer Staples industries issued 24 profit warnings in the third quarter, compared with 27 in the same period last year.

Elsewhere, EY-Parthenon found that one in five of the 64 profit warnings issued during Q3 cited weaker consumer confidence, the highest proportion recorded for this cause since 2022.

It added that policy change and geopolitical uncertainty were mentioned in almost half (47%) of all warnings, marking the highest percentage for this reason in more than 25 years of EY’s analysis. The figure rose sharply from 17% in the third quarter of 2024.

A further one-third (34%) of profit warnings were linked to contract or order cancellations and delays, while 22% referred to tariff-related pressures, including reduced demand and supply chain disruption.

Silvia Rindone, EY-Parthenon UK&I retail lead, said: “Retailers are entering the golden quarter under immense pressure, with profit warnings at a two-year high and profit warnings citing weaker consumer sentiment at their highest since 2022. The EY-Parthenon data shows that over half of retail warnings stem from declining confidence, and this is compounded by rising wage and tax burdens.

“To remain competitive, retailers must not only adapt to shifting consumer preferences but also rethink cost structures and operational agility. Innovation is no longer optional—it’s the key to resilience in a market defined by volatility.”

Jo Robinson, EY-Parthenon partner and UK&I financial restructuring leader, said: “Companies are still clearly seeing ripples from earlier geopolitical tensions and policy shifts, and the proportion of firms to have issued a warning in the last 12 months has consistently been at a level typically associated with a period of economic shock for the past two years. 

“As the Government faces difficult decisions ahead of the Autumn Budget, businesses are continuing to navigate market shifts and external threats, adapting their operations and supply chains to ongoing uncertainty and growing risks like cyberattacks.”

She added: “While buoyant equity markets over the summer sustained a narrative of corporate resilience, resilience is not immunity. Forecasting confidence is being disrupted by near-constant change, and restructuring activity continues to rise as persistent pressures leave many companies with tighter liquidity and reduced flexibility. 

“In this environment, firms must adopt a measured, scenario-based approach that balances both agility and strategic clarity.”