AO World (AO.) shares slump 25%: Can it bounce back by Black Friday?

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AO World (AO.) shares slump 25%: Can it bounce back by Black Friday?

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 AO World (AO.) shares slump 25%: Can it bounce back by Black Friday?
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Highlights

  • Shares of AO World Plc, an online retailer of domestic appliances and electronic goods, slumped after announcing its interim results for the six months ended 30 September 2021.
  • AO Group reported total revenue of £760 million, a rise of 6% year-on-year, while its adjusted EBITDA stands at £5 million.

FTSE 250 listed online retailer of domestic appliances and electronic goods, AO World Plc (LON: AO.), slumped over 25% after announcing its interim results for the six months ended 30 September 2021. The company stated that it might face a product shortage ahead of Black Friday sales, the annual sales event starting this week.

First Half Earnings

During the six months ended 30 September 2021, AO Group reported total revenue of £760 million, a rise of 6% year-on-year. The UK market contributed £661 million in revenue, while Germany’s sales were at £99 million. The company’s adjusted EBITDA stands at £5 million. However, it reported an operating loss of £11 million during the period. Overall, the company witnessed strong sales number with growth in repeat purchase rate.

The company’s third-party logistics revenue grew by 38.5% with a new contract in Germany. Also, it added five new smaller warehouses in the UK and Germany. The recycling facility run by the company recycled over two million fridges. It plans to sell recycled plastics to the manufacturer for its new products.

However, the company’s outlook for the second half of the financial year is lower due to multiple factors. It expects full-year group revenue to be down by 5%, while its adjusted EBITDA could fall in the range of £10 to £20 million.

Let us, deep dive, into concerns raised by the company that may impact its revenue and profitability in upcoming quarters:

Shortage of goods

The company mainly sells new-age gadgets like mobile phones and PlayStation, whose supply has been adversely impacted due to a shortage of semiconductor that are used in all electronic devices from toothbrushes to electric cars. The new categories of products where the company has less scale and experience have been impacted the most ahead of the Christmas festivals.

Shortage of delivery drivers and rising inflation

AO Group continues to face a shortage of lorry drivers for delivery of its goods to end consumers. As a result, it expects a rise in the shipping cost. Also, the company is witnessing consumer price inflation and a rise in material input costs which might hamper sales.

The company’s management said they are taking steps and decisive actions to mitigate the short-term crisis. Also, the company’s board remains confident about the future prospects and business model of the AO Group Plc.

The UK-based company operates as an online seller of household appliances and electronics goods in different European countries. It uses an in-house logistics network for delivering its products to consumers. The company also provides other ancillary services like financing of electronic goods, recycling of old items and insurance.

 

© 2021 Kalkine Media

Image description: AO World Stock Price

After the result announcement and concerns raised by the company, AO Group Plc’s stock price declined by over 25%, with an intraday low of GBX 87.50. It currently trades at GBX 101.50 on 23 November 2021 at 10:35 am GMT+1 with a market cap of £594.61 million.

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