AO World shares plunge on peak trading woes and annual profit warning

Online electrical retailer AO World has warned over annual results and said product shortages, price hikes and consumer belt-tightening are set to hit peak festive trading.

AO World's site in Telford
AO World's site in Telford

The company, which has a major recycling centre in Telford and a warehouse in Stafford, saw shares plummet by more than a quarter on the alert as it laid bare the impact of the UK's lorry driver crisis and global supply issues on half-year figures.

AO World sank to a £10 million pre-tax loss in the six months to September 30 against profits of £18 million a year ago.

Underlying earnings slumped to £5 million from £28 million a year earlier.

The group said it has already had to increase prices by 10 per cent to 12 per cent over the past three to six months to offset soaring costs of freight, staff costs and warehousing.

But boss John Roberts cautioned there will be more price pain "to come" as the supply crisis and rocketing inflation show no sign of easing yet.

The group said key Christmas trading is now expected to be "significantly softer" than expected, which is set to leave full-year revenues either flat or down five per cent, and group underlying earnings in the range of £10 million to £20 million.

AO World had guided in early October that revenue growth in the second half would be in line with the first half rate of six per cent and forecast underlying earnings of £35 million to £50 million for the whole year.

As well as easing consumer demand due in part to wider cost pressures faced by households, the group is also battling amid global shortages of key Christmas products, such as Xbox and PlayStation 5 games consoles and iPhones.

AO World has recruited around 500 new drivers to help it overcome the labour shortages but said it was still seeing supply chain disruption, product shortages and higher costs of transport and freight.

"As we now look to the second half, we continue to see meaningful supply chain challenges with poor availability in certain categories, particularly in our newer products where we have less scale, experience and leverage," the group said.

Sales growth over its first half pulled back sharply to six per cent.

It said that with the boost from price hikes stripped out, sales have been falling in recent weeks compared with a year earlier.

Mr Roberts said inflation pressures are not set to ease yet, with prices expected to rise further.

He said: "My personal view is that's not the end of the road – I believe there will be more to come.

"We're operating in a volatile and uncertain world."

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