Retail sector under immense pressure as UK listed companies issue 20 profit warnings in 2024

UK FTSE retailers issued 20 profit warnings in 2024, marking a slight improvement from the previous year, which saw 24, according to an EY Parthenon report.

In the fourth quarter of 2024, FTSE retailers issued seven profit warnings, a significant increase from the one warning issued in Q3. Although the total number for the sector decreased in 2024, the proportion of listed retailers issuing warnings only saw a marginal decline, from 39% to 38%.

The report also highlights that 75% of FTSE personal goods companies issued a warning in 2024 (ten warnings in total), whilst 52% of FTSE household goods and home construction companies also warned (19 warnings in total). Half of all FTSE retailers' profit warnings in 2024 cited weaker confidence as a leading factor behind the warnings.

Silvia Rindone, EY Partner and UK&I Retail Lead, says: "Profit warnings in the retail sector remained prevalent in 2024. Whilst festive trading reports were broadly positive, they highlight that 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.”

Across all sectors, one in five UK listed companies issued a profit warning in 2024, the third highest annual proportion in 25 years, behind only the 2020 pandemic (35%) and the impact of the dot-com bubble burst and 9/11 in 2001 (23%).

By the end of 2024, 274 profit warnings had been issued – including 71 in Q4 – down slightly from the 294 issued during 2023.

The leading factor here was contract and order cancellations or delays, cited in 34% of warnings, including 39% in Q4 - the highest quarterly percentage for this reason in more than 15 years. Increasing costs triggered nearly one in five (18%) warnings in the last 12 months.

Jo Robinson, EY-Parthenon Partner and UK&I Turnaround and Restructuring Strategy Leader, says: “It’s clear that companies have faced an extraordinary succession of forecasting challenges since the pandemic, contending with interconnected disruptions to supply chains, material and energy costs, and the labour market, as well as higher interest rates.”

“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."

“Ordinarily, a sustained increase in company earnings pressures would be followed by a significant rise in insolvencies. But this cycle has been different. The availability of cheap, long-term debt and pandemic support provided breathing space for both businesses and stakeholders to explore consensual solutions and new restructuring options.”

“However, more companies are now reaching a tipping point as cumulative pressures build. We don’t expect a huge uptick in insolvency levels in 2025, but we are now seeing more distress, and more stakeholders viewing insolvency processes as a real option in finding the best path forward."

“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.”

2024 RTIH INNOVATION AWARDS

UK retail was a key focus area at the sixth edition of the RTIH Innovation Awards.

The awards celebrate global tech innovation in a fast moving omnichannel world.

Our 2024 hall of fame entrants were revealed during an event which took place at RIBA’s 66 Portland Place HQ in Central London on 21st November, and consisted of a drinks reception, three course meal, and awards ceremony presided over by comedian Lucy Porter.

In his welcome speech, Scott Thompson, Founder and Editor, RTIH, said: “The event is now into its sixth year and what a journey it has been. The awards started life as an online only affair during the Covid outbreak, before launching as a small scale in real life event and growing year on year to the point where we’re now selling out this fine, historic venue.”

He added: “Congratulations to all of our finalists. Many submissions did not make it through to the final stage, and getting to this point is no mean feat. Checkout-free stores, automated supply chains, immersive experiences, on-demand delivery, next generation loyalty offerings, inclusive retail, green technology. We’ve got all the cool stuff covered this evening.”

“But just importantly we’ve got lots of great examples of companies taking innovative tech and making it usable in everyday operations - resulting in more efficiency and profitability in all areas.”

Congratulations to our 2024 winners, and a big thank you to our sponsors, judging panel, the legend that is Lucy Porter, and all those who attended November's gathering.