Appliance retailer AO World slips into loss as costs rise and demand weakens

Appliance retailer AO World has turned a loss for the full year, warning of slowing sales, product shortages, rising costs and weak consumer demand.

The London-listed group posted a £37m loss in the 12 months to March 31, down 87% from a £20m profit in the previous financial year. Revenue fell 6.2% to £1.6bn.

The AO blamed a driver shortage and global supply chain inefficiencies in the first half of the financial year on soaring inflation, rising interest rates and rising energy costs leading to weaker customer demand in the second half.

Founder and CEO John Roberts said despite the volatility, “the core fundamentals of the business remain strong.”

British consumer spending picked up in July but failed to keep pace with inflation, which this week topped 10% for the first time in 40 years.

The British Retail Federation said the small increase in annual sales “masks a much larger drop in sales once inflation is taken into account”.

Currys, a fellow electronics retailer, cut its profit forecast last month and warned that online growth would stall as British consumers cut back on spending amid rising inflation.

AO has been a winner from the pandemic, with sales booming in the UK and Germany in 2020 thanks to a shift to online shopping, but driver shortages and supply chain disruptions start to suffer in 2021. AO issued consecutive profit warnings, causing the stock price to plummet by $80. cents over the past year.

The white goods retailer closed its German division, which accounts for 10 percent of total revenue, in June as customers turned to pre-coronavirus shopping behavior faster than expected.

The company estimated on Thursday that the cost of closing the German operations would be no more than £5 million.

Shares in the group were up 15% in early London trade. AJ Bell’s financial analyst Danni Hewson attributed the increase to AO’s clarity on the cost of exiting Germany.

“The company is also very optimistic, even though it may just be AO, despite the many problems behind it, it has been very brave,” he said.

The retailer said last month it would raise $4,000 after it lost more than a quarter of its value in July following reports that a leading credit insurer had cut coverage for suppliers. million pounds to strengthen its financial position.

AO’s profits have historically suffered from efforts to replicate its UK success in Europe. The group closed its Dutch branch in 2019 to focus on improving profitability in Germany and expanding in the UK.

Since exiting the German business, the retailer said it is now focusing on its core UK market.

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