Warning of Electronic Product Shortages this Christmas

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. The BBC News Website is reporting that 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. They warned that the key festive trading period would be “significantly softer” than anticipated.

“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.

Richard Hunter, head of markets at online share broker Interactive Investor, called AO’s problems a “white-knuckle ride”.

In addition to supply problems and staff shortages in the UK, he pointed to issues overseas. “The group’s foray into the German market is not only in the early stages of establishing the brand, but is also being faced by significantly increased competition,” he said.

Local electronics and white goods supplier, Heslop Appliances of Newcastle, have said they are also struggling to get stock at this time. Many companies, from toy, food and clothes retailers to furniture giant Ikea, have warned of labour shortages, higher costs and disruption to supplies.

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