The accounting company, Ernst & Young, have recently completed analysis which shows that the number of profit warnings being issued by companies has risen by 70 percent. In the third quarter the number of profit warnings was around 50 but in the final quarter nearly 90 warnings were issued.
This shows the biggest increase in this type of warnings in 10 years. Throughout the entire year there were nearly 280 profit warnings, which is around 80 more than aware in the previous financial year.
The number of listed companies issuing warnings increased nearly 15 percent, some of the most notable warnings came from Premier Foods and Mothercare. Currently, more profit warnings are being issued and have been seen since the start of the financial crisis back in 2008. Retailers are the companies issuing the most warnings and many expect this is simply because customers have less money to spend.
The head of restructuring at Ernst & Young is Alan Hudson who is stated, “There are still companies performing well in the market despite consumers cutting back their spending. Despite people having less disposable income they are spending money on items that they particularly value. The problem for many retailers is that consumers are generally cutting back on their spending which is affecting them negatively.”
It is not just retail that is being hit hard and many other sectors are releasing profit warnings. Computer services and software companies issued over 30 warnings in the last year which is the highest number since 2008.
About a fifth of the sector issued profit warnings during 2011. Mr Hudson continued, “The number of profit warnings being issued is an indicator of a change in the economy and it shows just what a hard year 2011 was for all companies, especially those involved in retail.”