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UK electricals retailer AO World’s annual profit slumps on higher costs
Global Banking & Finance Review®
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(Reuters) -British online electricals retailer AO World posted an 87% slump in annual profit on Thursday, as supply chain snags and higher labour and marketing costs squeezed earnings and inflation-hit consumers reined in spending.
(Reuters) -British online electricals retailer AO World posted an 87% slump in annual profit on Thursday, as supply chain snags and higher labour and marketing costs squeezed earnings and inflation-hit consumers reined in spending.
The company said its trading had been broadly in line with expectations in the first quarter of the 2023 financial year, and that it expected adjusted annual core profit to come in a range of 20 million pounds to 30 million pounds ($24.04 million-$36.05 million).
“We entered the new financial year with a period of strategic realignment, and a focus on cash and profit generation,” founder and Chief Executive Officer John Roberts said in a statement.
Electricals retailers in Britain are facing the heat of a worsening cost of living crisis that has crushed consumer confidence and hit spending, raising uncertainty about their sales outlook amid efforts to generate cash and contain rising costs.
AO World estimates cash costs from the closure of its German business, which accounted for more than 10% of its revenue last year, would be no more than 5 million pounds.
The group said adjusted core profit was 8.5 million pounds for the 12 months ended March 31, compared with 64.4 million pounds a year ago.
It swung to an operating loss of 32 million pounds, compared to an operating profit of 30 million pounds in the previous year.
($1 = 0.8321 pounds)
(Reporting by Muhammed Husain in Bengaluru; Editing by Subhranshu Sahu)
Profit is the financial gain obtained when the revenue generated from business activities exceeds the costs associated with those activities.
Inflation is the rate at which the general level of prices for goods and services rises, eroding purchasing power.
Supply chain issues refer to disruptions in the flow of goods and services from suppliers to consumers, often affecting product availability and costs.
Adjusted core profit is a measure of a company's profitability that excludes certain one-time items, providing a clearer view of ongoing operational performance.
Consumer confidence is an economic indicator that measures how optimistic or pessimistic consumers are regarding their expected financial situation.
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