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Electricals retailer AO World sees shares slide 20% as it issues its third profit warning

EconomyElectricals retailer AO World sees shares slide 20% as it issues its third profit warning


Electricals retailer AO World sees shares slide 20% as it issues its third profit warning in six months due to inflationary pressures

  • The Bolton-headquartered business sells white goods
  • It said last month it was notified of higher warranty cancellations than average as customers responded to the escalating cost of living 
  • Shares in AO were 20.77% lower in the run up to midday extending losses over the last year to 75% 

Shares in online electricals retailer AO World slumped 20 per cent today as it issued its third profit warning in six months due to inflationary pressures.

The Bolton-headquartered business, which sells washing machines, fridges, cookers and televisions, said last month it was notified of higher warranty cancellations than average historical trends as customers responded to the escalating cost of living.

The company said the picture had improved since March, but cautioned that data on warranties received prior to publication of full-year results this summer could have a further material impact on profit.

Online electricals retailer AO World witnessed more than a 20% drop in its share price as it issued its third profit warning in six months due to inflation hitting consumers

Online electricals retailer AO World witnessed more than a 20% drop in its share price as it issued its third profit warning in six months due to inflation hitting consumers

Surging prices are causing the biggest squeeze on UK household incomes since at least the 1950s and consumer confidence is at near record lows.

Almost a quarter of people in Britain said it became harder to pay household bills even before increases in regulated energy prices took effect, an official survey published on Monday found.

As Britons seek ways to save cash, data has shown they are cutting back on streaming services and buying more cheaper own-brand food from supermarkets.

Shares in AO were 20.7 per cent lower in the run up to midday extending losses over the last year to 75 per cent, after it forecast year to March 31 core earnings, or EBITDA, of about £8million ($10million), down from expectations in November of £10-20 million.

Full-year revenue was expected to be £1.56billion, down 6 per cent.

‘In view of the volatile market conditions, inflationary cost pressures and logistical challenges in the supply chain, together with the escalating cost of living for consumers, we remain cautious about our revenue and profit outlook in the near term,’ AO said.

Rival Currys in January trimmed full-year profit guidance by 3 per cent.

AO has been reviewing the future of its struggling business in Germany.

‘The strategic review is continuing, and a number of options remain under consideration by the board,’ it said.

Commenting on AO’s results Zoe Mills, a senior retail analyst at GlobalData, a leading data and analytics company, said: ‘Having been a clear winner during the pandemic, AO World’s stellar growth performance has finally stalled, with group revenue down 6 per cent for the 12 months ending March 2022. 

‘The online pureplay was hit by supply chain constraints in H1 coupled with more muted consumer appetite for big-ticket items amid the ongoing cost of living crisis during the latter half of this financial year. 

‘This result was worse than anticipated with AO World initially forecast group revenue for the year to be between -5 per cent and 0 per cent in its H1 FY20201/22 statement, highlighting that the peak trading period for the online electricals specialist was a dud. 

‘Indeed, its share price has fallen almost 20 per cent in early morning trading as it expects group adjusted EBITDA to reach just £8million this financial year – a decline of 73 per cent on FY2020/21. 

‘Nevertheless, with both group and UK revenues up 52 per cent on a two-year basis, AO World has time to turn this around and the online pureplay must focus on enticing consumers to trade up to more premium brands given that volumes in the UK electricals market are forecast to decline by 8.5 per cent in 2022.’

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