South East: 2018 'exceptionally tough' for retailers, EY report shows

Last year saw the highest level of profit warnings issued by general retailers in the South East since 2012, with 10% of the total number of profit warnings by listed companies across the region coming from this sector.

According to EY’s latest profit warnings report, general retailers in the South East issued six profit warnings in 2018 – the highest number of warnings in six years, since seven warnings were issued in 2012.

South East companies, across all sectors, issued a total of 59 profit warnings in 2018, compared to 54 in 2017 – a rise of 9%. 16 warnings were made in the last quarter of 2018.

The South East recorded the highest number of warnings in 2018 from sectors including support services (12), general retailers (6) and software and computer services (5).

38% of general retailers across the UK issued a profit warning – the highest level since 2008 – mirroring the upward trend in the South East. 2018 also saw the second highest level of profit warnings issued by UK plc since 2008, with 287 profit warnings, a rise of 4% year-on-year.

Neil Hutt, partner in EY’s Transaction Advisory team in the South East, commented: “Following events last week, there is further political and economic uncertainty to contend with and no let-up in the pace of change. But rising uncertainty wasn’t the only reason why profit warnings spread in 2018.

“In the retail sector, a combination of a relentless margin squeeze, the continuous need for reinvention and falling consumer confidence made 2018 an exceptionally tough year for the retail sector in the South East and across the whole of the UK.

“What happens next depends on how much more unpredictable 2019 becomes. Markets adjust quickly to new realities, however, in this fast-moving world companies need to keep moving forward or risk finding themselves on the wrong side of sector trends, potentially triggering a new cycle of profit warnings in years to come.”