AO World shares plunge as driver shortages hit trading
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Shares in electronics retailer AO World plunged more than 20 per cent on Friday after the company revealed that driver shortages and supply chain disruptions were holding back the business.
The British online appliances group was an early pandemic winner, thanks to strong digital sales. However, the group said that revenues for the half-year ending on Thursday increased only 5 per cent compared with the same period at the beginning of Covid-19 lockdowns.
UK revenues rose 6 per cent, while those in Germany edged up 3 per cent in local currency terms, far below analyst expectations. Stiff competition from big online retailers such as Amazon and the UK’s haulage driver shortage were cited as reasons for the weak performance.
“The challenging market dynamics in both the UK and Germany resulted in lower volumes than expected which affected operational leverage, particularly in the second quarter,” the company said.
Its shares were down 22 per cent in early afternoon trading in London at 168.88p.
Tony Shiret, analyst at Panmure Gordon, said the company’s progress in Germany was a concern given “that it’s a more immature business there, and it should be capable of growing whatever the market conditions”.
Overall growth in the second half of the year is expected to be similar to the first, with adjusted earnings before interest, taxes, depreciation and amortisation for the full year anticipated to fall in the £35m to £50m range – some 20 per cent below consensus expectations. The company noted that profits would be weighted more heavily than usual towards the second half of the year.
The Bolton-based group specialises in selling household appliances such as washing machines and fridges. It benefited strongly from the trend for home improvements early in the pandemic, when millions around the world found themselves in lockdowns, boosting its share price by 387 per cent in 2020. It has since fallen back 60 per cent in 2021.
Businesses across the UK have been left struggling to maintain their supplies following an exodus of EU lorry drivers since the UK’s decision to leave the bloc in January. Deliveries of petrol have been disrupted, resulting in a run on filling stations by panicked consumers over the past week. Products have also been missing from supermarket shelves and retailers have warned of shortages in the lead-up to Christmas.
A survey by the Road Haulage Association estimates that the UK has a shortage of about 100,000 qualified haulage drivers. The government has plans to issue 5,000 temporary visas for foreign lorry drivers to come to the UK in the months until Christmas.
However, business and industry leaders have said the scheme does not go far enough, and fails to address key worker concerns over immigration status and working conditions in the UK.