A growing number of Britain’s biggest retailers are telling investors they will make less money this year than previously forecast, as rising costs and weaker demand squeeze margins across the sector.

Five FTSE-listed retailers issued profit warnings in the second quarter of 2026, up from three in the first, according to figures published on Monday by EY-Parthenon. A profit warning is a formal alert companies must give when earnings are set to miss forecasts. Every warning cited the Middle East conflict’s impact.

EY-Parthenon UK and Ireland retail lead Silvia Rindone said retailers had entered the year cautiously optimistic after a strong festive season, but that conditions had shifted quickly.

“While headline sales have shown some resilience, this has often been driven by promotions rather than underlying demand strength,” Rindone said. “Many retailers are navigating a difficult balancing act between protecting margins, remaining price competitive and continuing to invest in technology and customer experience.”

Rindone added that the second half of the year offered some supportive factors, such as seasonal demand, but that ongoing cost pressures, cautious consumers and geopolitical uncertainty would continue to determine which retailers performed better and which faced greater challenges.

“The growing divergence in performance across the sector is becoming more pronounced,” Rindone explained. “Businesses able to fund investment in AI, other technology and customer experience are strengthening their competitive position, while others are struggling to keep pace.”

The EY-Parthenon report noted that it was unusual for profit warnings to rise between the first and second quarters. It is only the third time this has happened since 2007. So far this year, FTSE retailers have issued eight profit warnings, two more than in the same period last year.

The strain extends beyond retail, with UK-listed companies issuing 59 profit warnings in the second quarter, four more than in the first quarter. Travel and leisure fared worst with seven profit warnings, while home construction issued six.

Nearly a fifth of all UK-listed businesses have issued at least one profit warning in the past 12 months, a sign that corporate distress remains elevated, EY-Parthenon said.

EY-Parthenon’s financial restructuring lead for the UK and Ireland Jo Robinson said years of disruption had reduced companies’ 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,” she said. “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.”

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