Shares in AO World tumble as company warns over customers cancelling warranties

Online electricals retailer AO World has warned that Britons are cancelling repair warranties on their appliances to save money amid rising cost of living pressures.

Shares in the company tumbled almost a fifth on Friday morning after the retailer issued its third profit warning in six months.

AO told shareholders its profits for the past year have been impacted by lower sales volumes and an increase in UK logistics costs.

It added that it has also been impacted by driver shortages over the first half of the year and a jump in marketing costs in Germany.

The company said it is therefore set to post earnings of about £8 million for the year to March.

Late last year, the company said it was on track for earnings of between £10 million and £20 million for the year.

“In view of the volatile market conditions, inflationary cost pressures and logistical challenges in the supply chain, together with the escalating cost of living for consumers, we remain cautious about our revenue and profit outlook in the near term,” the company said.

“In the coming year, we will focus on cash generation to strengthen the balance sheet whilst optimising our cost base to align with the expected lower levels of revenues.”

AO revealed that revenues are set to have declined by 6% over the year to March, compared with the same period last year.

The company also told investors that it will make its full results announcement “six to eight weeks” later than planned as it continues a review of its German operation.

Meanwhile, founder and chief executive, John Roberts, confirmed he will “dispose of a small proportion of his equity holding”, expected to be worth about £5 million over the year.

Shares in AO fell 19.4% in early trading.