Problems on high street result in rise in profit warnings in region
There was a rise in the number of businesses in the North West issuing profit warnings in the first quarter – according to the latest figures from financial services firm EY.
The increase is being linked to the problems on the high street and the dip in consumer confidence.
A series of firms have hit problems in the retail sector and several have entered into CVAs. Firms who have had problems include Carpetright, Debenhams and House of Fraser.
There were 12 profit warnings from quoted companies in the first three months of the year, up from 11 at the same time last year and nine in the previous quarter.
Food and drug retailers and household goods providers based in the region were particularly hit with six warnings in total.
Nationally, retail warnings across the UK hit a seven-year high, with 13 profit warnings from almost a fifth of companies in the FTSE general retailers sector.
Sam Woodward, EY’s restructuring partner for the North West, said: “Cyclical and structural pressures are once again colliding to reshape the UK’s high street.
“There is still growth at home and especially abroad, however, 2018 is unquestionably a less benign year for many UK companies exposed to the UK consumer economy.
“As the North West figures show, that has an impact beyond retailers themselves to the goods supply chain.”
The region had the third highest number of profit warnings in the country, after London (17), and the South East (19).
Across the UK, quoted companies issued 73 profit warnings in the first quarter, two fewer than the same quarter of 2017 and 10% less than the previous quarter.
The FTSE sectors issuing the most profit warnings were retailers (13), support services (10), software & computer services (6) and travel and leisure (5).
Cost and competitive pressures remain high on the agenda, cited in 32% of warnings, including over half of FTSE general retailers and all three FTSE household goods warnings.
Ten warnings cited adverse exchange rates, a post-EU Referendum high. Sterling has regained some ground, but its weakness still has bite as companies adapt to new currency hedging arrangements.
Sam Woodward said: “A less forgiving investor reaction to profit warnings reflects increased market volatility and more fundamental concerns as technology and changing consumer behaviour disrupts many sectors.
“Where the structural challenge is greatest, we expect to see sharper divides emerge between those who have grasped new realities and those left behind in the old economy.”
