EY Ireland has said that Ireland is experiencing a surge in profit warnings among publicly-listed companies similar to 69% spike observed in the UK during the third quarter.
The latest EY-Parthenon UK profit warnings report by the big four firm and Parthenon shows 86 profit warnings were issued by UK-listed companies in the third quarter, up from 51 in Q3 2021 and 64 in Q2 this year (+34%).
The UK data shows over 40% of FTSE retailers and more than 60% of FTSE personal care, drug and grocery stores issued a profit warning in the last 12 months.
Andrew Dolliver, partner at EY-Parthenon in Ireland, said the challenges highlighted by the UK profit warning data are "very much consistent with the challenges being presented to many businesses in Ireland.
"The challenges that this UK profit warning data points to are very much consistent with the challenges being presented to many businesses in Ireland," he continued.
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"This isn’t surprising given the same unprecedented combination of headwinds including rising costs, slowing demand and continued supply chain issues are present in each market."
Dolliver added that Irish businesses, unlike their UK counterparts, were facing the challenges "from a position of relative strength with an economy that is expected to fare better over the next 12 months compared to the UK," supported by a booming multinational sector and less reliant on consumer spending.
"In this uncertain climate it’s vital that Irish businesses develop resilience against future shocks now, and demonstrate a clear understanding of how their business will adapt under different geopolitical and economic scenarios," he warned.
"Increasing uncertainty means that events could move quickly for companies that show signs of stress - turning the situation around requires a swift response, sustainable and defendable forecasts, and maintaining stakeholder trust.”
Commenting on what Irish retailers can glean from this data, Colette Devey, EY Ireland partner and consumer products and retail lead, said: “The retail sector in Ireland continues to face challenges ahead.
"Whilst seasonal factors such as Halloween, Black Friday and the Christmas trading period present opportunities for Irish retailers to reverse the recent trend of falling sales, consumer sentiment remains impacted by cost of living concerns.
"However, the recent Irish budget provided a range of support to businesses and households, and retailers should use the breathing space provided to focus on key initiatives which will build their resilience."
She added that managing supply-side issues remains essential, especially as the risk of surplus stock and inventory write-offs increases, but that retailers must also adapt to changes in consumer behaviour.
"Our Future Consumer Index shows that the market is polarised between cash strapped consumers who are watching every penny and those who are willing to spend if retailers entice them," Devey continued.
"Those retailers who understand their customers’ needs and can deliver tangible value for money, for example, through increasing their own-label offerings or strengthening loyalty and voucher offers, will be more likely to thrive in today’s challenging economic climate.”
(Pic: Getty Images)
