AO World warns of product shortages this Christmas

Online electricals retailer AO World has warned that product shortages and supply chain problems in the Christmas trading period will hit profits.

AO saw sales soar during lockdown, but that runaway growth has been halted by higher labour and transport costs.

On Tuesday, the firm posted a half-year pre-tax loss of £10m, down from an £18m profit in the six months last year.

AO warned that the key Christmas trading period would be "significantly softer" than anticipated.

That sent AO's share price crashing, with the shares down 25% a few minutes into trading on Tuesday.

The nationwide lorry driver shortage that has hit many companies remains a problem, AO said.

It had recruited about 500 new drivers to help beat labour shortages, but said it was still seeing "meaningful supply chain challenges", product shortages and higher costs of transport and freight.

"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.

AO World, which sells a diverse range of electrical goods, including laptops, washing machines, and mobile phones, said the all-important festive period would be far tougher than it anticipated just a few weeks ago.

It expects underlying profits for the year to March of between £10m-£20m compared with a previous forecast of between £35m-£50m issued in October. Profits last year nearly tripled to £64m.