HomeBusinessMoneyAO World shares plummet 25% as forecasts slashed on supply chain woes

AO World shares plummet 25% as forecasts slashed on supply chain woes

AO World shares plummet 25% as supply chain concerns see online electrical retailer slash profit forecasts once again

  • Pandemic winner records second profit warning in less than two months 
  • Supply chain woes, product shortages and inflation hit peak trading period 
  •  Loss of £11m for the six months to 30 September, down from £16m profit YoY

Online electrical retailer AO World shares nosedived more than 25 per cent today after the firm was forced to slash profit forecasts for the second time in less than two months.

AO World told investors that supply chain issues, product shortages and rising costs were hammering trading during its all-important peak period. It cut full-year sales forecasts by 5 per cent, and annual earnings expectations from £35million-£50million to £10million-£20million.

The company’s shares are down nearly 70 per cent year-to-date, having fallen more than 20 per cent at the start of October after a similar profit warning.

AO World’s peak trading period hampered by supply chain issues, product shortages and rising costs

Just this summer, AO World said it was optimistic that it could deliver double-digit growth this fiscal year and announced plans to expand its business into France, Italy and Spain as part of a five-year plan to double the size of its business.

AO World, which sells laptops, washing machines, mobile phones and printers, has been a beneficiary of the pandemic as Britons in lockdown ramped up online spending and sales climbed.

However, UK growth has in recent months stumbled in response to a nationwide shortage of delivery drivers and ongoing global supply chain disruption.

AO World said: ‘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.

‘In addition, shipping costs, material input prices and consumer price inflation remain challenging uncertainties.’

The firm assured investors it is ‘taking decisive action to address and mitigate the issues’ and said it is ‘confident in our ability to trade our way resiliently through this period’, adding that international expansion plans ‘remain entirely unchanged’.

However, this did not stop AO World shares sliding more than 25 per cent to 92.55p on Tuesday.

It had reported profit of £64million for its 2021 fiscal year, and an operating loss of £11millio for the six months to 30 September, compared with a profit of £16million a year before.

Revenues for the half year remained 67 per cent above pre-Covid levels, with UK and German revenues up 65 per cent and 82 per cent respectively.

Founder and chief executive John Roberts said: ‘Our results over this period have inevitably been affected by the constraints and uncertainty seen across our industry. We’ve materially cemented the progress of last year, with a step change in scale and consumer behaviour – and the fundamentals of the business are in place for sustained growth.

‘We’re working hard to solve some of the current challenges that our industry is facing. We’ve recruited c.500 new drivers and are working closely with our manufacturer partners so that customers can get what they need.

‘While the short-term challenges are clear, I remain hugely optimistic about AO’s long-term growth prospects.’

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