Electronics retailer AO World has downgraded its guidance for the full year, pushing its shares down 25 per cent, as the cost of delivery driver shortages and supply chain disruption hit trading.
The FTSE 250-listed digital white goods retailer expects full-year group revenue to be “flat” or fall as much as 5 per cent year on year, with group adjusted earnings before interest, taxes, depreciation and amortisation in the range of £10m to £20m.
AO shares shed a quarter of their value in early trading on Tuesday before paring losses to sit 13.6 per cent lower at lunchtime in London, taking their decline for the year to 74 per cent.
The online retailer has recruited roughly 500 new drivers to combat shortages, but said in a statement on Tuesday that trading was “significantly softer than we anticipated only eight weeks ago”.
“We have fixed the capacity problem, but the cost of doing that obviously now continues,” said chief executive John Roberts. “The annualised running cost of doing that is going to be about another £15m.”
Product shortages, shipping costs, rising prices and inflation have generated “challenging uncertainties”.
“There is material product inflation of 10 to 12 per cent that has come through the market over the last six to 12 months,” said Roberts. “There is definitely inflationary pressure being felt on household budgets . . . one can only assume it’s negative, but to what extent is unclear.”
Last month the retailer said second-half growth would be similar to the first, with adjusted earnings before interest, taxes, depreciation and amortisation for the full year anticipated to be in the £35m to £50m range — some 20 per cent below consensus expectations.
“At the start of our financial year in April, we planned for continued revenue growth and built up our cost base accordingly,” the company 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.”
Group revenue in the six months to September rose 6 per cent from the same period last year to £760m. It was up 67 per cent compared with the same pre-pandemic period two years ago.
“Our results over this period have inevitably been affected by the constraints and uncertainty seen across our industry,” said Roberts.
AO said the long-term trends were positive, however. “Over 50 per cent of the market in the UK is now transacted online,” Roberts said. “The direction of travel is for that to continue growing.”
Source: Economy - ft.com
