Profit warnings trigger sharpest drop in share prices since financial crisis
Profit warnings have sparked dramatic share price drops not seen since the height of the financial crisis a decade ago, according to a report out today from accountancy firm EY.
FTSE companies that have issued a profit warning in the third quarter of 2018 have suffered an average 21 per cent fall in the value of their shares, marking the sharpest drop in nearly 10 years.
While the number of year-on-year profit warnings edged down from 75 to 68 in the third quarter of 2018, the last 12 months have seen the highest proportion of quoted companies that have made a profit warning since mid-2016.
A flurry of embattled retailers have sounded the alarm bell in recent months, with high street giants such as Debenhams spooking many City investors in the wake of warnings issued since the start of 2018.
Read more: Debenhams could close dozens of stores in cost-cutting drive
In the year-to-date a third of FTSE retailers have issued a profit warning, surpassing last year’s total, with fears that more difficulty is still to come in the run-up to the Christmas period.
“Retailers have contended with a year of weather extremes and the summer sun has benefited some, but burnt others. Looking ahead we anticipate one of the most demanding ‘golden’ quarters leading up to Christmas trading in many years,” according to Alan Hudson, EY’s head of restructuring for UK & Ireland.
A quarter of the FTSE travel & leisure sector has made a warning over the past twelve months, with a total of seven profit warnings in the third quarter of 2018, marking the highest third quarter total for two years.
Thomas Cook’s shares fell around 25 per cent in September after it issued a profit warning as customers opted to stay at home in the wake of a summer heatwave, putting off holidays abroad.