FTSE-listed retailers in the UK issued 20 profit warnings in 2024, down from 24 in the previous year, according to EY-Parthenon’s latest Profit Warnings report. Despite the overall decline, the number of warnings in the final quarter rose significantly, with seven warnings in Q4 compared to just one in Q3.
The proportion of listed retailers issuing profit warnings saw only a minor decrease, dropping from 39% in 2023 to 38% in 2024.
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Among FTSE Personal Goods companies, three-quarters (75%) issued warnings, while over half (52%) of FTSE Household Goods and Home Construction companies also reported profit concerns.
A key factor driving retail sector warnings was weaker consumer confidence, cited in half of the cases.
Economic uncertainty weighs on businesses
Retailers faced ongoing financial pressures despite an increase in disposable incomes.
EY Partner and UK&I Retail Lead Silvia Rindone highlighted that while festive trading reports were generally positive, consumer confidence remained fragile following the cost-of-living crisis. This hesitation among shoppers led to a disappointing close to the year for many retailers.
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By GlobalData“Shoppers are willing to spend if the price is right and the proposition is strong,” Rindone stated. However, uncertainty around rising costs, automation, and efficiency savings has led to widespread caution among retailers heading into 2025.
Higher employment costs and the need for investment in adapting to evolving consumer behaviour are expected to create further challenges for the sector.
Wider business landscape faces pressure
Across all UK-listed companies, one in five (19%) issued a profit warning in 2024. This marks the third-highest annual proportion in 25 years, trailing only the peaks of the COVID-19 pandemic (35%) and the early 2000s downturn (23%).
In total, 274 profit warnings were recorded in 2024, slightly lower than the 294 seen in 2023.
Contract and order cancellations or delays were the most common reasons for warnings, cited by 34% of companies. In Q4 alone, this factor contributed to 39% of warnings—the highest quarterly percentage recorded in over 15 years.
Rising costs also played a role, driving nearly one in five (18%) warnings throughout the year.
Future outlook remains uncertain
EY-Parthenon Partner Jo Robinson noted that businesses have faced persistent forecasting difficulties since the pandemic. Supply chain disruptions, increased material and energy costs, and labour market pressures have compounded these challenges.
Additionally, geopolitical instability and shifting policy environments have prompted businesses to delay spending and hiring.
While insolvency levels have remained relatively stable due to long-term debt availability and pandemic-related support, Robinson warned that more businesses are now reaching a critical juncture.
“We don’t expect a sharp rise in insolvencies in 2025, but financial distress is increasing, and more stakeholders are viewing insolvency as a viable restructuring option,” she said.
The report also highlights ongoing struggles in the recruitment sector, which is dealing with a slowdown ahead of planned increases in National Insurance Contributions and the National Living Wage.
With uncertainties around trade, interest rates, and global events, businesses across various sectors continue to navigate a challenging economic landscape.
