Shares in online domestic electricals retailer AO World (AO.) tumbled 20% to 174p, their biggest one-day fall in more than five years, after the firm posted a disappointing first half trading update and lowered its full year profit guidance.
The freezer to washer-dryer seller, whose shares rocketed from around 50p to 440p between June and December last year as consumer spending exploded during lockdown, reported like for like sales growth of just 5% in the six months to the end of September.
COMPETITION HEATING UP
The firm cited strong comparitives due to an ‘exceptional operating environment’ last year for the slowdown in revenues this year, as well as short-term disruption to the supply chain and the shortage of delivery drivers in the UK.
However, it also flagged growing competition in the online appliances market for part of the drop in sales growth, particularly in Germany.
‘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 firm cautioned.
SQUEEZE ON EARNINGS
While the company said it had implemented measures to help mitigate supply chain issues, it admitted it didn’t expect sales growth to improve from the first half’s miserly 5% in the second half of the year. This compares with analysts’ forecasts of 14% full year sales growth.
As a result, it lowered its full year target for earnings before interest, taxation, depreciation and amortization (EBITDA) to between £35 million and £50 million, against a consensus forecast of £52.5 million.
Moreover, the firm said it expected profits to be ‘more heavily weighted than usual towards the second half of the year driven by the peak trading period’, suggesting Prime Day and the run-up to Christmas would be even more important for sales than normal.
READ MORE ABOUT AO WORLD HERE
