Greater than £200m wiped off AO World’s worth amid provide chain issues

Greater than £200m has been wiped off the inventory market worth of AO World after the net retailer blamed driver shortages and provide chain issues for decrease than anticipated income.

The warning prompted a pointy sell-off, with traders fearing a reversal of fortunes for the electrical items retailer – one of many star performers of the pandemic when on-line purchasing boomed – as provide disruptions brought on by shortages of lorry drivers and elements and supplies ripple via.

Shares fell 23%, making it the highest faller on the FTSE 250, as traders reacted to gross sales goal misses within the UK and Germany within the six months to the tip of September. The warning additionally weighed on its rival Currys, which fell 8%, making it the second largest faller on the UK-focused index.

Bolton-based AO mentioned UK development had slowed due to a “nationwide scarcity of supply drivers and ongoing disruption within the world provide chain”.

The corporate mentioned: “The difficult market dynamics in each the UK and Germany resulted in decrease volumes than anticipated, which affected operational leverage, notably within the second quarter. “Whereas we proceed to see industry-wide points regarding ongoing provide chain disruption, we’ve carried out measures to assist mitigate these challenges in our logistics operations.”

AO expects income this monetary yr to be between £35m and £50m, a pointy drop from the pandemic-fuelled shopping for increase that drove income to £64m within the retailer’s earlier monetary yr, and under Metropolis expectations of £51m. Earlier than the coronavirus pandemic the corporate was making about £22m in revenue.

Till now, AO had been a pandemic winner as the general public embraced on-line purchasing en masse whereas shops remained shut throughout lockdowns.

“It’s astonishing how fortunes can change within the matter of a yr,” mentioned Russ Mould, the funding director at AJ Bell. “On-line operators had been the envy of the retail world because the pandemic took maintain. Now being a web-based operator means having to deal with shortages of drivers to get the products to the client. On-line retail is extra sophisticated than you may need thought.”

Regardless of the sharp sell-off on Friday, AO’s shares had been nonetheless greater than 160% larger than on the finish of February 2020, shortly earlier than the pandemic was declared.

AO tried to assuage investor issues that the height retail season operating as much as Christmas – often known as the “golden quarter” for retailers – could also be affected, saying it’s “well-placed to fulfill buyer demand” for that interval.

“Promoting fridges, TV and washing machines on-line is a low-margin enterprise and success is right down to reaching excessive gross sales volumes,” Bell mentioned. “With price pressures intensifying and gross sales volumes disappointing, AO faces a giant squeeze on income.”