In the final quarter of the year, there was a notable uptick in profit warnings among FTSE retailers, with seven issued compared to just one in the third quarter.
Despite a reduction in the overall warnings for the year, there was only a slight dip in the percentage of listed retailers that issued warnings, moving from 39% to 38%.
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For half of all profit warnings by FTSE Retailers in 2024, diminished consumer confidence was cited as a primary concern.
EY Partner Silvia Rindone said: “Profit warnings in the retail sector remained prevalent in 2024. Festive trading reports were broadly positive, but demand is only part of the story.
“Despite an increase in disposable incomes in 2024, consumer confidence has been slow to rebound following the cost-of-living crisis, resulting in a disappointing end to the year for many retailers.
“It’s clear that shoppers are willing to spend if the price is right and the proposition is strong. However, retailers’ uncertainty over how much rising costs can be offset through automation and efficiency savings, or passed on in price increases, is making them almost universally cautious about the year ahead. Higher employment costs and the investment needed to adapt to changing consumer behaviour will challenge every retailer during 2025.”
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By GlobalDataIn 2024, 19% of UK-listed companies across all sectors issued a profit warning, marking the third highest annual proportion in 25 years.
This rate was surpassed only during the 2020 Covid-19 pandemic , which saw 35% of firms adjusting their profit forecasts downward, and in 2001, when 23% of businesses did so amidst the aftermath of the dot-com crash and the events of 9/11.
By the end of 2024, a total of 274 profit warnings were issued, including 71 in Q4, slightly fewer than the 294 issued in 2023.
The primary reason for the warnings in 2024 was cancellations or delays in contracts and orders, which accounted for 34% of the warnings, including 39% in Q4—the highest quarterly percentage in over 15 years.
Rising costs were another significant factor, contributing to nearly one in five (18%) warnings over the past year.
EY-Parthenon Partner and UK&I turnaround and restructuring strategy leader Jo Robinson said: “2024 was also an exceptional year for global geopolitical uncertainty and policy upheaval, with a record level of profit warnings linked to contract and spending delays as businesses held back from recruitment and investment. As a result, companies’ forecasting strategies need to respond to both short-term policy changes and deeper structural issues.
“While the pace of profit warnings has eased slightly in early 2025, we’ve seen the recruitment sector continue to grapple with a downturn in activity across key geographies and sectors, before the increases in employer National Insurance Contributions and the National Living Wage take effect. Across the board, the road ahead remains rocky with challenges around trade, geopolitics, interest rates, and more.”
