Profit warnings also hit fashion retailers

Newport International Group

http://www.fashionunited.co.uk/fashion-news/fashion/profit-warnings-also-hit-fashion-retailers-2013012816789

Profit warnings have made to the news sincethe very beginning of the year, and the fashionand luxury industries have been no exception tothis trend. French Connection, Esprit, Burberry,Mulberry… all of them have seen their businessand stocks tumbling after issuing profitwarnings in the past months.

2012 will be recorded asthe worst year for UK-listed companies since theheight of the financialcrisis, as, according to datacompiled by the quarterlyErnst & Young report onprofit warning, there were287 profit warnings in2012.

Ernst & Young's latest quarterly profit warningsreport counted 86 issued in the last threemonths of last year. More than 15 percent of UKquoted companies issued warnings in 2012, onlyslightly down on 2008, the worst year onrecord, when there were close to 18 per cent.Burberry and Mulberry featured among the top-profile London-listed companies that haveissued profit warnings during the last year,being it two times for Mulberry.

Last to issue a profit warning in Londonwas ailing French Connection. Earlier inJanuary and in an unscheduled update,the owner of FCUK brand said Christmassales were hit by lower demand and adelay in discounting, upping theirestimated full year loss to 7.5m-8million pounds, far above the 6 millionconsensus forecast from the City.

Being the slowdown in China and otheremerging countries the main reason usedby retailers to back their warnings, itcame as little surprise when Hong Konglisted Esprit Holdings saw its shares offalling nearly 7 percent to a one-monthlow in mid-December after the retailerwarned of a possible loss for the sixmonths ending in December.

However and despite the gloomyfigure, it is worthy of mention thatdespite the spike in high profile retailcalling in the administrators, thenumber of retail profit warnings fellto 17 last year, from 39 a year ago.

Alan Hudson, head of Ernst & Young's UKrestructuring team, said rising uncertainty atthe end of 2012 had led to a fall in demand.“Slower-than-expected demand from China inparticular landed heavy blows on companiesreliant on emerging market growth, whichwould have cancelled out declining saleselsewhere,” he added. Big names in the fashionand luxury market have already raised theirconcerns on how a slower demand in China andthe broader Asian region is to affect their

business.

Mr Hudson said the number ofwarnings stayed low within the retailindustry as a consequence ofretailers having had already factoredin a squeeze on consumer spending.