Online electrical retailer AO World revealed it had swung to a £37m loss in the year to March as costs skyrocketed and pandemic-induced boom in sales dropped off.
The firm said this morning that sales fell six per cent for the year to £1.56bn while costs surged amid snarled supply chains and component shortages, causing it to swing into the red from a £20m profit last year.
The electrical retailer was among a host of firms to feel a major boost through the pandemic as demand for buying appliances online boomed with people stuck at home through lockdowns.
But bosses said today the firm had now been battered by a cocktail of global supply chain disruption, labour shortages and a cost of living crisis choking off sales.
“Like many businesses, we faced a number of challenges as we emerged from the Covid lockdown. Global supply chains have struggled to cope as the global economy emerged from Covid restrictions, which led to component shortages and hugely increased container shipping rates,” AO World ssaid in a statement.
“As a result, product and range availability was constrained for certain lines although, as one of the market leaders, we were still able to offer a wider range than many other electrical retailers. This was compounded by inflationary pressures in other costs right across our business, from staffing to vehicles, energy and fuel.”
The firm said it will now enter a ”period of realignment” as it pivots to focus on cash and profit generation, including the closures of its German operations, which it said would cost “no more than £5m”.
AO World has also bolstered its balance sheet in July with a £40m capital raise which it said would provide “the flexibility to capitalise on significant long term growth opportunities in the UK”.
Shares in the firm are trading above six per cent however, having jumped above 14 per cent earlier in the day despite the loss.
Analysts said that investors had shrugged their shoulders at the loss and embraced the clarity of the figures.
“The market liked the clarity on the cost of exiting its German business, coming in at the lower end of original guidance,” said Danni Hewson, financial markets analyst at AJ Bell.
“The company was also remarkably upbeat, although that may simply be AO putting on a brave face despite a multitude of problems in the background.”