Shares of AO World plunge 25% as forecasts for supply chain problems were lowered

Shares of AO World plunge 25% as supply chain concerns lower online electric retailer’s earnings forecasts again

  • Pandemic winner registers second profit warning in less than two months
  • Supply chain problems, product shortages and inflation peaked in trading period
  • Loss of £11 million for the six months to September 30, less than £16 million profit YoY



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Online electrical retailer AO World shares fell more than 25 percent today after the company slashed its earnings forecast for the second time in less than two months.

AO World told investors that supply chain problems, product shortages and rising costs were undermining trade during the all-important peak period. It cut full-year sales forecasts by 5 percent and annual profit forecasts from £35m – £50m to £10m – £20m.

The company’s shares are down nearly 70 percent since the beginning of the year, after falling more than 20 percent in early October following a similar profit warning.

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

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

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

AO World, which sells laptops, washing machines, mobile phones and printers, benefited from the pandemic as Britons in lockdown ramped up online spending and sales surged.

However, growth in the UK has stalled in recent months in response to a nationwide shortage of deliverers and ongoing global supply chain disruption.

AO World said, “Looking now into the second half, we continue to see meaningful supply chain challenges with poor availability in certain categories, especially in our newer products where we have less scale, experience and leverage.

“In addition, shipping costs, commodity prices and consumer price inflation remain challenging uncertainties.”

The company assured investors it is “taking decisive action to address and mitigate the issues” and said it is “confident in our ability to act resiliently through this period,” adding that international expansion plans “remain completely unchanged.”

However, this didn’t stop AO World shares from sliding more than 25 percent to 92.55p on Tuesday.

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

Sales for the half remained 67 percent above pre-Covid levels, while revenues in the UK and Germany were up 65 percent and 82 percent respectively.

Founder and CEO John Roberts said: “Our results over this period have been inevitably impacted by the constraints and uncertainty in our industry. We’ve solidified last year’s progress significantly, with an incremental shift in scale and consumer behavior – and the company’s foundations are in place for continued growth.

“We are working hard to solve some of the current challenges facing our industry. We have hired approximately 500 new drivers and are working closely with our manufacturer partners to ensure 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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