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AO World warns profits to be hit by supply chain issues, product shortages

By Frank Prenesti

Date: Tuesday 23 Nov 2021

AO World warns profits to be hit by supply chain issues, product shortages

(Sharecast News) - Online electrical retailer AO World cut its profit outlook as it warned of product shortages due to supply chain issues and higher costs.
The company on Tuesday said the crucial Christmas trading period "is significantly softer than we anticipated only eight weeks ago".

AO World said it now expected full year group revenue to be flat-to-minus 5% year on year, with group adjusted core profit in the range of £10m - £20m, compared to its previous forecast of £35m - £50m issued last month.

It reported a £5m core adjusted profit for the six months to September 30, down 84% from last year, but up 24% from the pre-pandemic period two years ago.

AO said growth in the UK had been impacted by the nationwide shortage of delivery drivers and the ongoing disruption in the global supply chain, while the German online market had 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," the company said.

"In addition, shipping costs, material input prices and consumer price inflation remain challenging uncertainties."

Richard Hunter, head of markets at Interactive Investor said: "Despite these wild swings, the market consensus of the shares remains at a 'buy'."

"The undeniable shift towards online shopping, allied to the absence of a store portfolio cost drag, both provide opportunities for the business. At the same time, the group's international aspirations remain intact and, indeed, there are signs of progress in the German market, despite its being a relative newcomer. In the meantime, however, the challenges are clear and with the shares not obviously cheap on valuation grounds, some investors have chosen to vote with their feet."

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