Yahoo Finance AO World shares plunge 20pc as customers cancel warranties
Shoppers are racing to cancel their repair warranties on electrical goods to save money, amid an escalating cost of living crisis.
AO World, which sells toasters, televisions and fridges, said that last month there was a spike in cancellations as customers tightened their belts to cope with higher bills and grocery costs.
It comes after almost a quarter of Britons said they were struggling to pay their household bills, according to data this week.
Cash-strapped shoppers have been cancelling subscription services such as Netflix and Disney+ and are buying more own-brand food from supermarkets.
Although the picture had improved since March, the company warned that the trend could have a material impact on profits.
AO World was a Covid winner as shoppers flocked to its website to buy the latest gadgets when they were forced to work from home.
However, the shares lost a fifth of their value, trading at 70p, after it issued a profit warning on Friday, in stark contrast with highs of 429p in January last year.
The firm also revealed that founder and chief executive John Roberts intends to offload £5m worth of shares this year for the first time since taking the company public in 2014. The move will allow him to diversify his investments and it could become an annual occurrence.
When the company listed on the stock market, Mr Roberts said that he would leave his fortune to charity and not his children so they can “make their own lives”.
The company also said the publication of its full year results to March 31 would be delayed by six to eight weeks owing to a strategic review of its business in Germany.
Sales during the period were down 6pc to £1.5bn. Underlying profits are expected to come in at £8m after its margins were dented by lower sales and high logistics costs, including drivers’ wages.
The company added that it remained cautious about its revenue and profits in the near term owing to “inflationary cost pressures and logistical challenges in the supply chain, together with the escalating cost of living for consumers”.
