The squeeze is on … profit warnings and times of economic decline understandably often go hand in hand.
So, it should be no surprise to see companies hastily backtrack on profit expectations.
Here’s a quick rundown on some of the businesses to issue warnings in recent weeks and some of the reasons why.
Made.com
Made.com Group PLC (LSE:MADE), the ecommerce furniture and home accessories company, said volatile trading and worsening consumer confidence will hit profits by roughly £20mln for the remainder of the year in its first half report.
Sales in the first half of the year were down 19% compared to the same period last year, citing the cost of living crisis hitting demand for big-ticket items as well as making new customer acquisitions difficult.
The group also cut guidance on several other metrics, including adjusted underlying earnings.
Hotel Chocolat
Hotel Chocolat Group PLC (AIM:HOTC) warned it will post a statutory loss after closing its stores in the United States.
The British chocolate brand had posted a rebound in sales but a discontinuing of operations in the US will mean that it will report a loss for the fiscal year 2022.
However, it does expect to report a pre-tax profit for the year to be “in line with market consensus.”
It also guided lower profits for 2023 but has set a goal of achieving a 20% underlying earnings margin in 2025.
Sabre
Motor underwriter Sabre Insurance Group PLC (LSE:SBRE) warned that rising inflation was wreaking havoc on its claims estimates.
Premiums have risen 19% so far to help meet rising costs, with claims inflation rising to 12% currently, up from 8% last year.
Much of the issue comes from the rising costs associated with parts, labour, credit hire, paint, values and availability.
The combined ratio, which includes costs, jumped to 98.9% from 74.4%, which means interim profits were cut to £4.3mln from £22.2mln.
Direct Line
Only days later, Direct Line Insurance Group PLC (LSE:DLG) followed with its own warning, in mostly similar circumstances.
The group said full-year combined operating ratio is expected to be in the range of 96% to 98%, up from the 93% to 95% guidance given in May.
Inflation, higher third-party claims costs, longer repair time and more expensive car parts were cited as the reason.
Entain
Entain PLC (LSE:ENT), the owner of Ladbrokes, Sportingbet and Foxy Bingo, lowered its online growth guidance as the cost of living crisis affects the number of customers.
FTSE 100 listed betting firm lowered online revenue growth to ‘flat’ from ‘mid to high single digit’ for the full year as online sales fell 7% in the first half of the year.
The company, where a lot of recent investor excitement has focused on its US joint venture with MGM, said, “weaker macro-economic environment is reducing customers' rate of spend, moderating overall online growth versus our previous expectations.”
Currys
Currys PLC (LSE:CURY) said it had a “strong operational and financial performance” in the year to 30 April 2022, but cautioned that the outlook for consumer spending is uncertain and forecast a fall in profit for the current year.
Macro conditions such as the shift towards online and the current economic outlook forced the electrical goods retailer to adjust pre-tax profits to £130mln-£150mln for the upcoming fiscal year.
For the last year, the group reported a pre-tax profit of £186mln.
Supreme
Supreme warned that revenue and earnings (EBITDA) are likely to be below last year and below previous market expectations for the current year 2023 due to a slowdown in lightbulb sales.
A marked slowdown in lighting sales in the past 12 months was compounded by customer overstocking, leading it to cut guidance for 2023, though it said it still expects "another solid, profitable year.”
The battery and lighting products distributor, which also sells e-cigarettes, said it is slashing its dividend payout ratio from fiscal 2023 onwards, from 50% to a minimum of 25%.
Fevertree
Fevertree Drinks PLC (AIM:FEVR), the maker of posh drinks mixers, warned that soaring costs are diluting its margins as it cut its forecasts to 33% from 36%.
It did, however, retain its production guidance for 2022 of between £355mln to £365mln.
Zalando
Zalando, the German online fashion retailer, sent shares in UK rivals Boohoo and ASOS tumbling after a warning that it is no longer benefitting from rebounding consumer confidence.
Guidance for the fiscal year was cut by Zalando, with revenue now expected to grow anywhere between 0% and 3% to £8.92bn- £9.18bn, compared to predictions earlier in the year of 12% to 19% growth.
In an attempt to combat some of the issues, Zalando said it will be introducing a minimum order value across 15 additional markets.
Rank
Rank Group (LSE:RNK), the brand behind Grosvenor Casinos, cut expectations on the back of “softer performance” in its UK venues.
As a result, underlying profit for the year is expected to be around £40mln for the year, rather than the previous set guidance of £47mln- £55mln.
Despite seeing an improvement in performance since April, the FTSE 250 company said that this was still “considerably” weaker than expected.
Performance was impacted, according to its statement, by overseas customers returning to the UK slower than expected.
Halfords
Back in June, Halfords Group PLC (LSE:HFD) slashed its profit targets for next year to somewhere between £65mln-£75mln, down from the prior consensus of £86.5mln
The automotive and bike parts retailer also acknowledged, however, that the following year is likely to bring large amounts of uncertainty.
ASOS
Online fashion retailer ASOS PLC (LSE:ASC) blamed the impact of inflation on consumer behaviour as the reason for slashing its profit targets for the fiscal year.
According to its statement, “uncertain consumer purchasing behaviour,” the online retailer now expects pre tax profit between £20mln and £60mln for the year end 31 August.
That figure is considerably down on the £193.6mln profit it made last year.
It said inflation had a “disproportionate impact” on its profitability in the three months through to 31 May this year due to the impact of customer returns.
Devolver
Three poor game launches along with higher costs resulted in US video game developer Devolver Digital Inc (AIM:DEVO) warning on profit.
The group said in a statement that “slower than expected” sales from newly released games Shadow Warrior 3, Weird West and Trek to Yomi.
It attributed the poor revenues to a competitive game release window and "specific factors for each title which are being actively addressed for future titles."