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Electricals retailer AO World warns of Christmas stock shortages

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Online electricals retailer AO World has warned over annual results and said product shortages, price hikes and consumer belt-tightening are set to hit peak festive trading (AO.com/PA) (PA Media)
Online electricals retailer AO World has warned over annual results and said product shortages, price hikes and consumer belt-tightening are set to hit peak festive trading (AO.com/PA) (PA Media)

Electrical retailer AO World has predicted that shortages of products over Christmas will hit its profits this year, while shoppers will face further painful price rises

It said that the festive trading period would be “significantly softer” than expected and that the availability of some items will remain poor. The company recorded a £10m pre-tax loss in the six months to 30 September, down from an £18m profit in the same period a year ago.

It said it had been hit by a nationwide shortage of lorry drivers and has brought in 500 new recruits to combat labour shortages. The company is still seeing “meaningful supply-chain challenges” and higher costs for transporting goods.

It has already had to increase prices by between 10 and 12 per cent over the past three to six months. Chief executive John Roberts cautioned there could be further rises to come.

"My personal view is that’s not the end of the road – I believe there will be more to come,” he said. “We’re operating in a volatile and uncertain world."

A worse-than-expected Christmas would mean annual revenues will either be flat or down 5 per cent, AO forecast.

Shares in the online seller of appliances and gadgets plunged 25 per cent after the announcement on Tuesday.

AO World’s valuation more than quadrupled last year as people stocked up on gadgets during lockdowns. The company has now lost almost all of its share price gain during the pandemic.

Sales growth for the first half of the financial year was 6 per cent – well down on last year’s pace. While sales were up in cash terms, the company has sold less goods but at higher prices in recent weeks than it did at this time last year.

"At the start of our financial year in April, we planned for continued revenue growth and built up our cost base accordingly," AO said.

"However, since then, growth in the UK has been impacted by the nationwide shortage of delivery drivers and the ongoing disruption in the global supply chain, and the German online market has seen significantly increased competition.

"As we now look to the second half, we continue to see meaningful supply chain challenges with poor availability in certain categories, particularly in our newer products where we have less scale, experience and leverage."

In addition, shipping costs, the cost of materials and consumer price inflation "remain challenging uncertainties," the company said.

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