With investor focus on the Bank of England and Federal Reserve’s interest rate decisions later this week, it is noteworthy how many profit warnings were released on Tuesday.

‘These profit warnings suggest investors need to be on their guard for the next earnings season,’ said AJ Bell investment director Russ Mould.

‘Further cracks are appearing in the corporate world. Gloomy Tuesday saw multiple UK companies issue profit warnings, led by Kingfisher (KGF) which downgraded its earnings forecasts after a poor show from its Polish operations and a lacklustre turn in France.’

Investors weren’t swayed by the European Home improvement company announcing a new £300 million share buyback but instead took fright at the 7% full year profit downgrade sending the shares 7% lower to 220p.

That is small beer compared with the 36% drop in the shares of apparel and footwear retailer Quiz (QUIZ:AIM) after it lowered full year sales guidance by 6% to 7%.

The company anticipates lower sales will tip the business into a loss for the year of up to £1.5 million pounds compared with a profit of £2.3 million last year.

DOORS CLOSING

Shares in doors and windows retailer Safestyle (SFE:AIM) fell 41% to 4.8p, registering a new all time low after the company flagged a bigger than anticipated full year loss of between £9.5 million and £10.5 million.

The company blamed the prolonged cost-of-living squeeze and higher interest rates.

AJ Bell’s Mould said: ‘Safestyle says its market slumped in August and September versus last year, and news that it is gaining market share wasn’t enough to prevent a 41% decline in its share price.

HIRING FREEZE

Specialist provider of training programs for software coding Northcoders (CODE:AIM) listed on AIM last July at 183p per share.

On Tuesday the shares sank 33% to 128p after the company said headwinds in technology spending due to budget constraints and hiring freezes means full year revenue and profit is likely to be ‘significantly below’ current expectations.

GLASS HALF EMPTY

It is tempting to think alcohol consumption might be resilient to a squeeze on consumer spending but that isn’t the case at online retailer Naked Wines (WINE:AIM).

The direct-to-consumer wine merchant flagged a slower than expected start to its 2024 financial year, leaving the shares nearly 10% lower at 63.3p.

Comparable full year sales to 31 March 2023 were down 8% and the company delivered £16.3 million of operating profit, beating analysts’ expectations.

The shares are down around 50% for the year.

Disclaimer: Financial services company AJ Bell referenced in the article owns Shares magazine. The author of the article (Martin Gamble) and the editor of the article (Steven Frazer) own shares in AJ Bell.

 

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