FTSE Retailers: 40% Issue Profit Warnings in 2023

Retailers in the UK Face a Second-Walk of Profit Warnings

According to EY‑Parthenon’s latest Profit Warnings report, the FTSE Retailers sector sliced its red‑flag list to 24 warnings in 2023—a tidy third fewer than the 36 warnings that had come in 2022. Yet that number still means 40% of those retailers had to put a “warning” across their decks last year.

Year‑On‑Year Trend: Slow Start, Booming Finish

Retailers didn’t jump straight out of the gate. The first part of 2023 saw a noticeable drop in warnings when compared to 2022, but the story flipped in the last quarter. A total of nine retailers issued profit warnings in Q4 2023—exactly the same as the previous year’s Q4 figure.

Black Friday tried to work its charm but sales misses kept the red flags flying.
Post‑Christmas sales didn’t give the lift many expected.
Fashion chains accounted for the majority of those warnings with five of the nine knocked over.

All of this is a blur of tightening economics—inflation, higher rates, and soaring energy costs—pressing on consumers’ discretionary pockets.

Personal Care, Drug & Grocery Stores Stay Quiet

The FTSE Personal Care, Drug and Grocery Stores sector kept its noise low, issuing only three profit warnings in 2023 compared to sixteen the previous year. Even as food sales rose 6.8% in the three months to December, the sector seemed to play it safe.

Insight from EY’s Retail Lead

Silvia Rindone, EY UK&I Retail Lead, shared her expert take:

“Even though disposable income pressure is easing a bit, shoppers are still tightly fanning the flame when it comes to retail. Household income is likely to grow comfortably above inflation in 2024, but 2023 saw wages hit a snag amidst rising prices.”
“Retailers will still feel the sting from high business rates expected in April, plus the tug of ongoing geopolitical swings in supply chains.”
“With consumer confidence hovering at a low, retailers must recalibrate their offering and truly get to the heart of what shoppers need. Those who’re already on the beat are starting to see their market share widen.”

In short, UK retailers are walking a tightrope—still battling falling sales while trying to keep an eye on inflating costs. One thing’s clear: those who listen closely to their customers are the ones standing at the top of the aisle.

National warnings higher than peak of 2008 financial crisis

UK Companies Fret… 18% of Public Firms Issued Profit Warnings in 2023

Picture a boardroom full of nervous nods: 18.2% of UK-listed companies decided to raise a red flag, warning that their profits might dip this year. That’s a bump above the height of the 2008 financial scare—though only a dozen fewer warnings were thrown up than in 2022.

Numbers that Shiver

294 profit warnings tossed into the market in 2023 (down by 11 from 305 in 2022).
18.2% of all public firms hit the warning button, beating the 17.7% peak of the 2008 crisis.
Last year, 26% of the flags were lifted because companies were sitting on contracts or decisions for too long.
19% blamed rising costs; another 19% pointed finger at rising interest rates.

Quarter-by-Quarter Quirks

In Q4 2023, 77 warnings (no big leap from the previous 76) were issued, but cost woes shook less hard by year‑end: only 10% of complaints that quarter, vs 41% a year earlier.

Meanwhile, delays and higher rates kept gaining traction—24% of warnings in the second half of 2023, up from just 14% in the first half.

Size Matters

Early in the year, smaller businesses—those more exposed to demand and margin swings—tipped the scales. By Q4, though, the scope widened: a third (33%) of all warnings came from companies juggling revenues over £1 billion.

Insight from a Trusted Voice

Jo Robinson, EY-Parthenon partner, shared her two‑minute brainwave:

“In a year mired in uncertainty, firms struggled with earnings and guessing games. That’s why we see so many profit warnings.

Costs eased a bit by year‑end, but the spike in delays and weak consumer confidence tells us people still hesitated to spend. 2024 is hopeful—faster inflation and rate cuts are the dream—but many pieces still need to click into place for a gentle economic landing.

We foresee a widening gap: some companies will scoop up the little growth still on the table, while others get stuck chewing on earnings pressure and high capital costs. 2024 could be easier for many, but not for all UK firms.”