Retail sector bulks up Yorkshire and North East profits warnings in Q3
Quoted companies based in Yorkshire and North East issued eight profit warnings in the third quarter of 2018, according to EY’s latest Profit Warnings report.
The warnings take the total issued in Yorkshire and the North East during 2018 to 27, a 29% increase on last year (2017: 21).
Across the UK, quoted companies issued 68 profit warnings in Q3 2018, seven fewer than the same period of 2017.
Companies issuing profit warnings saw their share prices fall by an average of 21%, a drop comparable to figures seen ten years ago at the height of the financial crisis.
The number of quoted companies warning in the last 12 months has also increased by nearly 8% with 206 warnings compared to 191 a year ago.
Nationally, General Retailers issued eight warnings and a third of the sector warnings in the year-to-date. According to EY’s report, half of FTSE General Retailers warning in Q3 2018 cited the impact of the warm weather.
Across the UK, the FTSE sectors with the highest number of warnings in Q3 were: General Retailers (8), Travel & Leisure (7), Support Services (7), and Financial Services (6).
Hunter Kelly, EY’s head of restructuring for Yorkshire and the North East, said: “Five of the region’s eight warnings in the third quarter came from retailers, contributing significantly to the national picture which saw eight general retailers in total issue warnings.
“Retailers have contended with a year of weather extremes and the summer sun has benefited some, but burnt others.
“Looking ahead we anticipate one of the most demanding ‘golden’ quarters leading up to Christmas trading in many years. UK consumers are now extremely savvy and I suspect many will hold off to see when the retailers blink and start discounting to drive sales.”
Kelly added: “The continued growth of online sales and the ever increasing cost burden of operating bricks and mortar stores will also squeeze some retailers to the point of breaking.
“Increasing capital market volatility and crisis-level investor reaction to profit warnings underlines a growing market concern about what comes next and a fear for the worst. The danger of this and any reductions in credit insurance cover can lead to self-fulfilling prophecies. With so much of the UK economic and political outlook on the line, investors clearly want to be backing the most resilient business models and those that are on trend with what the current market is demanding.”
