Yorkshire retailers hit by profit warnings

Hunter Kelly, EYs head of restructuring for Yorkshire and the North EastHunter Kelly, EYs head of restructuring for Yorkshire and the North East
Hunter Kelly, EYs head of restructuring for Yorkshire and the North East
The bulk of recent profit warnings in Yorkshire came from the retail sector, as high street players struggle to cope with the faltering economy, weather extremes and the move to online shopping.

Yorkshire quoted companies issued eight profit warnings in the third quarter and five were from the retail sector, according to EY’s latest Profit Warnings report.

A third of FTSE general retailers have warned in the year to date, with 2018 warnings already exceeding 2017’s total before we hit the vital Christmas quarter.

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According to EY’s report, half of FTSE general retailers warning in the third quarter of 2018 cited the impact of the warm weather.

Hunter Kelly, EY’s head of restructuring for Yorkshire and the North East, said: “Five of the region’s eight warnings in the third quarter came from retailers, contributing significantly to the national picture which saw eight general retailers in total issue warnings.

Retailers have contended with a year of weather extremes and the summer sun has benefited some, but burnt others. Looking ahead we anticipate one of the most demanding ‘golden’ quarters leading up to Christmas trading in many years.

"UK consumers are now extremely savvy and I suspect many will hold off to see when the retailers blink and start discounting to drive sales. The continued growth of online sales and the ever increasing cost burden of operating bricks and mortar stores will also squeeze some retailers to the point of breaking."

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Earlier this month, sofa specialist DFS Furniture reported a steep fall in annual profits and said it expects the market to remain subdued as a result of political risk and weak consumer sentiment.

The Doncaster-based firm said pre-tax profit fell 48.5 per cent to £25.8m in the year to July 28 after the summer heatwave hit sales in the fourth quarter.

The group's chief executive Ian Filby said: "Financial results for the year reflected the exceptional downturn in market demand we saw in the fourth quarter.

"We expect the market to remain subdued into 2019, constrained by political risk and weak consumer sentiment."

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Budget greetings card firm Card Factory blamed the weak consumer environment and extreme weather conditions for a decline in first half underlying sales.

The Wakefield-based firm reported total sales growth of 3.2 per cent in the six months to July 31, but like-for-like sales fell 0.2 per cent.

Karen Hubbard, Card Factory’s chief executive, said: “We continue to experience a weak consumer environment, made all the more challenging by the impact of this year’s extreme weather conditions on high street footfall."

In September, over 50's fashion retailer Bonmarche warned over profits, blaming weak consumer demand and hot summer weather for a decline in sales.

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The Wakefield-based budget fashion chain said that online sales held up during the second quarter, but store revenues were below expectations.

As a result, underlying pre-tax profit for the year is now expected to be approximately £5.5m, down from last year’s £8m.

Bonmarche's chief executive Helen Connolly said: “These are undoubtedly challenging times in the retail industry and, in common with many other businesses, Bonmarche’s store trading has been impacted by weaker consumer sentiment and footfall.

Double glazing firm Safestyle UK reported an "extremely challenging" first half following significant business disruption caused by aggressive new market entrant SafeGlaze UK.

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Bradford-based Safestyle reported a pre-tax loss of £6m in the six months to June 30, down 164 per cent on the previous half year when it made a profit of £9m.

Safestyle's CEO Mike Gallacher said: “The results reflect an unprecedented set of circumstances faced in the first half of the year that created a number of significant challenges for the business."

EY said the warnings take the total issued in Yorkshire and the North East during 2018 to 27, a 29 per cent increase on last year.

Companies issuing profit warnings saw their share prices fall by an average of 21 per cent, a drop comparable to figures seen ten years ago at the height of the financial crisis.

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In a further worrying sign for the UK economy, the number of quoted companies warning in the last 12 months has increased nearly 8 per cent with 206 warnings compared with 191 a year ago, according to the report.

Nationally, consumer sectors still dominate, with general retailers issuing eight warnings and a third of the sector warnings in the year to date.

However, profit warnings are starting to spread back into industrial and financial segments of the economy.