AO World shares tumble due to extreme trading crunch and annual profit warning

Online electricals retailer AO World has warned of annual results, saying product shortages, price hikes and consumer belt-tightening will hit the festive season.

Shares of the group on the alert fell more than a quarter as it laid bare the impact of the UK lorry driver crisis and global supply issues on half-year figures.

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

Underlying income decreased from £28 million a year ago to £5 million.

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

But boss John Roberts cautioned that there will be more price pain “to come” as the supply crisis and rocket inflation show no sign of easing just yet.

The group said key Christmas trading is now expected to be “significantly softer”, with full-year revenue set to leave either flat or 5% down, and the group’s underlying earnings of £10 million to £20 million. is within the limits of.

AO World gave guidance in early October that revenue growth in the second half would be in line with a first half rate of 6% and forecast underlying earnings of £35 million to £50 million for the full year.

The group is also grappling with a global shortage of key Christmas products, such as Xbox and PlayStation 5 game consoles, and iPhones, as well as denting consumer demand due to widespread cost pressures facing families.

AO World has recruited about 500 new drivers to help address the labor shortage, but said it is still seeing supply chain disruptions, product shortages and high costs of transportation and freight.

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

Its first half sales growth quickly returned to 6%.

It added that sales since the price hike have been falling in recent weeks compared to a year ago.

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

He added: “My personal view is that this is not the end of the road – I believe there will be more to come.

“We are operating in a volatile and uncertain world.”

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