Profit warnings also hit fashion retailers

Profit warnings have made to the news since the very beginning of the year, and the fashion and luxury industries have been no exception to this trend. French Connection, Esprit, Burberry, Mulberry… all of them have seen their business and

stocks tumbling after issuing profit warnings in the past months.

2012 will be recorded as the worst year for UK-listed companies since the height of the financial crisis, as, according to data compiled by the quarterly Ernst & Young report on profit warning, there were 287 profit warnings in 2012.

Ernst & Young's latest quarterly profit warnings report counted 86 issued in the last three months of last year. More than 15 percent of UK quoted companies issued warnings in 2012, only slightly down on 2008, the worst year on record, when there were close to 18 per cent. Burberry and Mulberry featured among the top-profile London-listed companies that have issued profit warnings during the last year, being it two times for Mulberry.

Last to issue a profit warning in London was ailing French Connection. Earlier in January and in an unscheduled update, the owner of FCUK brand said Christmas sales were hit by lower demand and a delay in discounting, upping their estimated full year loss to 7.5m-8 million pounds, far above the 6 million consensus forecast from the City.

Being the slowdown in China and other emerging countries the main reason used by retailers to back their warnings, it came as little surprise when Hong Kong listed Esprit Holdings saw its shares of falling nearly 7 percent to a one-month low in mid-December after the retailer warned of a possible loss for the six months ending in December.

However and despite the gloomy figure, it is worthy of mention that despite the spike in high profile retail calling in the administrators, the number of retail profit warnings fell to 17 last year, from 39 a year ago.

Alan Hudson, head of Ernst & Young's UK restructuring team, said rising uncertainty at the end of 2012 had led to a fall in demand. “Slower-than-expected demand from China in particular landed heavy blows on companies reliant on emerging market growth, which would have cancelled out declining sales elsewhere,” he added. Big names in the fashion and luxury market have already raised their concerns on how a slower demand in China and the broader Asian region is to affect their business.

Mr Hudson said the number of warnings stayed low within the retail industry as a consequence of retailers having had already factored in a squeeze on consumer spending.