UK Retailers Slash Profit Warnings 55% YoY in Q3 2023

UK Retailers Face a Fatigue‑Fueled Warning Wave

What the Numbers Say

In the last three months of 2023, 15 profit warnings popped up from UK‑listed retailers – a sharp dip of 44% from the 27 warnings logged during the same period in 2022. That’s a sign that the cost‑and‑supply storm is finally showing signs of fraying.

Consumer Staples Not Far Behind

Supermarkets and fast‑moving goods giants, sitting in the Consumer Staples FTSE group, also didn’t keep it. They only issued 5 warnings in Q3 2023, compared to 12 last year. Even the grocery shelves feel the strain.

Insights From the Minds Behind the Numbers

Silvia Rindone, EY UK & I Retail Lead highlights a key point: “Economic headwinds easing didn’t automatically install good vibes. Retailers still feel the chill of cost‑of‑living doubts as we edge toward the shopping‑golden quarter.” She sums up the weather on consumer spending as a mixed bag – lower energy bills and baking‑price relief boost confidence, but rising oil costs and a hawkish labour market keep the pressure on.

Those retailers who braced for the 2022 supply tantrum might need to bolt back into action this year. With interest rates stuck near high‑points and consumer confidence doing a wobble, planning around pricing and inventory becomes a top priority. Reports show many shoppers are putting off holiday splurges to trim their wallets, especially when September feels like a fashion “summer” that’s too warm for shoes.

Waning Numbers, Rising Concerns

76 profit warnings issued nationwide from July to September 2023 – the first yearly decline in a quarterly total since 2021.
Seven straight quarters saw year‑on‑quarter rises before this dip, breaking a streak that dates back to 2008.
Post‑credit‑crisis average for Q3 still sits 18% above the current 2023 figure.
Key stressors:

33% – tougher credit conditions.
21% – delayed/cancelled contracts.
18% – weaker consumer confidence.
20% – slowing housing market.
20% – cost pressures.

Thoughts From the EY Parthenon Team

Jo Robinson, EY‑Parthenon Partner notes: “The drop in warnings is a nice green flag, but the spike in credit‑related woes tells us the pressure isn’t easing anytime soon. The steepest interest‑rate climb in four decades is still chewing away at businesses, especially those due for refinancing or heavily reliant on cheap credit.”

Robinson urges immediate action: “A resilient balance sheet and extended debt maturities give us a cushion, but don’t let that cushion turn into complacency. Adjust ops now or risk losing value when the market shifts at lightning speed.”