Supply chain crisis: retail, food and defence firms predict further damage

Companies in retail, food and defence have warned of further damage from supply chain problems that have dogged industry during disruption from the coronavirus pandemic and Brexit.

Months of shipping delays have caused prices and lead times of goods from abroad to soar, meaning some businesses have been unable to take advantage of economic recoveries that have followed lockdowns.

Businesses have also complained that post-Brexit restrictions on immigration have hampered their efforts to find enough workers, leading to record numbers of UK job vacancies.

Here are some of the warnings delivered by companies on Thursday:

Ikea

The world’s largest furniture retailer said stock shortages would continue for as long as another year, after months of disruption in which the company has been sometimes unable to meet voracious demand.

Jon Abrahamsson Ring, the chief executive of Inter Ikea, the owner of the Ikea brand, told the Financial Times that the company had hired its own trains to transport materials from Asia to Europe to try to circumvent shipping bottlenecks.

“We actually foresee that the availability and raw materials challenge will continue for the better part, if not the whole, of [the financial year to the end of August],” Ring said. “This is here for a longer period than we thought of at the beginning of the crisis.”

QinetiQ

The FTSE 250 defence technology company said “technical and supply chain issues on a large complex programme” could cost as much as £15m, equivalent to a tenth of its profits before tax in its 2021 financial year.

QinetiQ, which was privatised in 2003, is a key supplier to the UK’s Ministry of Defence, providing an array of services ranging from maintaining Typhoon fighter jets to engineering navy warships and army vehicles. However, it did not give details of which contract was struggling for parts.

Shares fell by 13% after the company said the issues could result in a one-off writedown in its profit guidance, although its medium- and longer-term guidance would remain unchanged.

Dunelm Group

The British homewares retailer said it faced an uncertain macro outlook mainly because of “supply chain disruption and inflationary pressures from freight and driver shortages”.

Dunelm has benefited from the home makeover boom during the pandemic, as Britons’s spending migrated away from travel, leisure and hospitality towards cushions and curtains. Sales continued to rise in its last financial quarter to 25 September.

However, it said it was not immune to the challenges in global supply chains, albeit adding that it felt relatively confident that it could handle them because of high buffer stocks and relatively low demand for seasonal goods needed before Christmas.

Poundland

The boss of the discount retailer’s owner said it was having to find cost savings in order to avoid raising prices because of higher shipping costs.

Andy Bond, the chief executive of Warsaw-listed Pepco Group, said prices would not rise on most products, but declined to detail the cost savings.

“The pressure that that will put on us from a margin point of view will be substantially offset by … cost initiatives in our own business,” he told Reuters.

Domino’s Pizza Group

The company said it faced “well-publicised inflationary pressures and challenging labour market” conditions, even as it said it would hire another 8,000 pizza delivery drivers to cope with the Christmas holiday rush.

“We see these pressures continuing into 2022,” said Dominic Paul, chief executive of the group that runs the pizza brand in the UK.

Domino’s hopes to attract workers with the offer of at least 4,000 permanent salaried roles, rather than gig economy work such as that offered by takeaway order rivals like Deliveroo and Uber Eats.