AO World warns about product shortages during Christmas

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Online electrical retailer AOWorld has warned of product shortages, supply chain problems and profits hitting during Christmas trading.

AO sales soared during lockdown but this runaway growth was halted due to higher transport and labour costs.

On Tuesday, the firm posted a half-year pre-tax loss of £10m, down from an £18m profit in the six months last year.

AO warns that Christmas will be “significantly softer than we anticipated”.

This caused AO’s shares to crash, and the shares fell 25% just a few minutes after trading began on Tuesday.

The problem of a shortage in lorry drivers nationwide that has affected so many companies is still a concern, AO stated.

To combat labour shortages it had hired 500 drivers, however the company said that they were still facing “meaningful supply chains challenges”, product shortages and high freight and transport costs.

“At April’s start to our financial year, we had planned for revenue growth. We also built our cost base in line with that plan,” AO stated.

However, the UK’s growth has been affected by a shortage of drivers to deliver goods and disruptions in global supply chains. The German online market, however, has experienced a significant increase in competition.

“We continue to observe significant supply chain issues with low availability in certain categories. We are particularly concerned about our products that we don’t have the scale or experience to solve these problems.

According to the company, there are still “difficult uncertainties” in shipping and material costs as well as consumer price inflation.

AO World, which offers a wide range of electronic goods including washing machines and phones, stated that it would find the holiday season much more challenging than anticipated just a few months ago.

It expects underlying profits for the year to March of between £10m-£20m compared with a previous forecast of between £35m-£50m issued in October. Profits last year nearly tripled to £64m.

Source: BBC.com

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