AO delays results as profits look set to take a pounding

Online retailing giant AO has announced that it expects its full-year profits to plummet from £64 million in 2020 to just £8m in 2021/22.

Not only is AO predicting a fall in profits, but it also expects sales to be down from £1.66 billion in FY2020/21 to £1.56bn, although that is still up from £903m in FY2019/20.

AO blamed the anticipated drastic reduction in its profits on the impact of lower sales volumes and higher costs incurred in its logistics operations, driver shortages in H1 and significantly higher marketing costs in Germany. It also warned that its latest data suggested that higher than average warranty cancellations “could lead to a material impact on FY22 profits”.

In January, AO announced a strategic review of its German business, because of “a number of material changes to the local trading environment”, intense local online competition and spiralling marketing costs.

AO said in a statement that because of “volatile market conditions, inflationary cost pressures, logistical challenges in the supply chain and the escalating cost of living for consumers” it remained cautious about its revenue and profits outlook in the neat terms, albeit confident in the long term.

The company reported gaining 1.5 million new customers and said reported a “notable step up in post-Covid repeat purchase rates” with its online MDA market share increasing to 54% against 43% pre-Covid.

Because of the timetable for the review of the German market and “the resulting complexity in the year-end process” AO has decided to delay the announcement of its full-year results by six to eight weeks later than planned.

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