Profit warnings have surged in the third quarter as cautious consumers put retailers under “immense pressure” heading into the crucial Christmas trading period.
Downgrades from listed retailers were almost double the same period in 2024, according to the latest report from EY-Parthenon.
In the third quarter of 2025, retailers issued nine profit warnings, the highest level since Q4 in 2023. More than half (56%) of these warnings for lower profits cited falling consumer sentiment as a central factor, underscoring growing concerns about weakened confidence in the sector.
The London-listed retail sector, which is made up of companies from the FTSE retailers, personal care, drug and grocery stores sectors, was particularly vulnerable as consumers became more selective in their spending, EY said in the report.
The professional services firm also highlighted challenges facing listed companies in these sectors, including delayed purchases and a shift towards lower-cost options, driven by rising costs and evolving consumer preferences.
Additionally, companies in the consumer discretionary and consumer staples industries, covering a combined 12 FTSE sectors, reported 24 profit warnings during the third quarter – the highest number since the same period last year, when there were 27 warnings.
During the third quarter, Pets at Home ousted CEO Lyssa McGowan as the retailer reported a surprise profits warning on the back of subdued conditions in the space, while shares in Greggs tumbled following a warning by the high street bakery chain that profits would be “modestly below” 2024 levels.
In July, ingredients supplier Treatt also lowered its profits guidance for the year, and meat processor Hilton Foods said in September that headwinds in seafood would mean its annual profits would be below expectations.
Primark owner Associated British Foods guided profit forecasts downward for its grocery division in a trading update and also warned of a “challenging environment, characterised by consumer caution, geopolitical uncertainty and inflation”.
Earlier this week, B&M fired its CFO after an accounting blunder led the under-pressure discounter to downgrade its profit guidance once more for the 2026 financial year.
“Retailers are entering the golden quarter under immense pressure, with profit warnings at a two-year high and profit warnings citing weaker consumer sentiment at their highest since 2022,” said Silvia Rindone, EY-Parthenon UK&I retail lead.
“The EY-Parthenon data shows that over half of retail warnings stem from declining confidence, and this is compounded by rising wage and tax burdens.
“To remain competitive, retailers must not only adapt to shifting consumer preferences but also rethink cost structures and operational agility. Innovation is no longer optional – it’s the key to resilience in a market defined by volatility.”
Consumer confidence falls
One in five of the 64 profit warnings issued during Q3 cited the impact of weaker consumer confidence, the highest proportion recorded for this cause since 2022, and a significant increase from just 6% during the same period last year.
The leading factor behind profit warnings in the third quarter was policy change and geopolitical uncertainty, cited in nearly half (47%) of warnings. This represented the highest percentage recorded for this reason in more than 25 years of EY’s analysis, up from 17% in Q3 2024. Additionally, one-third (34%) of profit warnings were linked to contract and order cancellations or delays, while 22% referenced tariff-related impacts, including weaker demand and supply chain disruptions.
Over the past 12 months, nearly a fifth (18%) of UK-listed businesses have issued at least one profit warning.
Jo Robinson, EY-Parthenon partner and UK&I financial restructuring leader, added: “Companies are still clearly seeing ripples from earlier geopolitical tensions and policy shifts, and the proportion of firms to have issued a warning in the last 12 months has consistently been at a level typically associated with a period of economic shock for the past two years. As the government faces difficult decisions ahead of the autumn budget, businesses are continuing to navigate market shifts and external threats, adapting their operations and supply chains to ongoing uncertainty and growing risks like cyberattacks.
“While buoyant equity markets over the summer sustained a narrative of corporate resilience, resilience is not immunity. Forecasting confidence is being disrupted by near-constant change, and restructuring activity continues to rise as persistent pressures leave many companies with tighter liquidity and reduced flexibility. In this environment, firms must adopt a measured, scenario-based approach that balances both agility and strategic clarity.”
No comments yet