Retail profit warnings rise in Q2 as fragile demand and cost pressures persist
FTSE retailers issued five profit warnings in Q2 2026, up from three in the first quarter of the year, according to EY-Parthenon’s latest Profit Warnings report. This makes 2026 only the third year since 2007 in which the sector has recorded more warnings in the second quarter compared to the first.
FTSE retailers issued a total of eight profit warnings in the first half of 2026, two more than the six recorded during the same period last year. This increase underscores the persistent structural and cyclical pressures facing the sector, despite periods of stronger trading performance.
Silvia Rindone, EY-Parthenon UK&I retail lead, said: “Retailers entered 2026 with cautious optimism following a stronger festive trading period, but the rise in profit warnings in Q2 shows how quickly conditions can shift. The sector remains highly exposed to external shocks, and the impact of geopolitical disruption has compounded existing pressures on costs, supply chains and consumer confidence. While headline sales have shown some resilience, this has often been driven by promotions rather than underlying demand strength. Many retailers are navigating a difficult balancing act between protecting margins, remaining price competitive and continuing to invest in technology and customer experience.
“The growing divergence in performance across the sector is becoming more pronounced. Businesses able to fund investment in AI, other technology and customer experience are strengthening their competitive position, while others are struggling to keep pace. This is widening the gap between higher-performing retailers and those facing ongoing financial pressure.
“Looking ahead, the outlook for the second half of the year is finely balanced. Supportive factors such as seasonal demand and policy developments may provide some uplift, but ongoing cost pressures, cautious consumers and geopolitical uncertainty mean execution will be critical in determining which retailers outperform and which continue to face challenges.”
Broader market context
Across all sectors, UK-listed companies issued 59 profit warnings in Q2 2026, up slightly from 55 in Q1. More than half (53%) of warnings in the quarter cited policy change and geopolitical uncertainty as a leading factor, the highest quarterly proportion recorded for this driver in more than 25 years of analysis.
The FTSE sector with the highest number of profit warnings during Q2 was Travel and Leisure, which recorded seven warnings. This marked the sector’s highest quarterly total since Q3 2022 (nine).
After Home Construction (six), three sectors issued five profit warnings in the second quarter. These were Software and Computer Services, Industrial Support Services – which encompasses business service providers, industrial suppliers and recruitment companies – and Retail.
Nearly a fifth (18%) of all UK-listed businesses have issued at least one profit warning in the past 12 months, indicating that corporate distress remains elevated despite some signs of stabilisation in overall warning volumes.
Jo Robinson, EY-Parthenon artner and UK&I Financial Restructuring leader, added: “The latest figures show that pressure and profit warnings are increasingly concentrated in sectors and businesses facing rising costs, cautious consumers and tighter credit conditions. Just as one source of pressure begins to ease, another emerges; a year ago, companies were grappling with disruption from tariffs and shifting trade policy, while the conflict in the Middle East has now triggered more than two-fifths of recent warnings.
“Beyond geopolitical tensions, businesses face some policy uncertainty – both domestically and abroad – which is creating a source of volatility. Many companies will adapt and thrive despite this backdrop, but there is growing evidence that years of rolling disruption have eroded corporate resilience. The number of profit warnings has stabilised, but the proportion of listed companies issuing them has reached levels more typically associated with recession in six of the last seven years. Whilst no single shock has matched the severity of the global financial crisis or pandemic, the cumulative impact of successive disruptions could be just as powerful.”