Shares in AO World PLC (LSE:AO.) tanked after the electrical retailer announced a fall in full-year revenue and warned that the near-term outlook for revenue and profit could be impacted by inflation, supply chain constraints and more customers cancelling warranties as the rising cost of living starts to bite.
In a trading update, the company said it expects to report a 6% drop in revenue for the year to 31 March 2022 to £1.55bn, against "strong prior year comparatives", with UK sales down 5% and German sales falling 12% compared with the same period in 2021.
On a two-year basis, group revenues increased 52%, reflecting the shift to online retailing.
The London-listed company said full-year underlying profit (adjusted EBITDA) is expected to be around £8mln, as a result of lower sales volume and higher logistical costs in UK, driver shortages and significantly higher marketing costs in Germany.
As global supply chain disruptions continue, the firm, which sells consumer durables and laptops, reported weakened consumer demand in the UK throughout the second half of the year.
AO World also said warranty cancellations were higher than normal in March, as customers responded to the escalating cost of living.
"While the picture has subsequently improved, data received subsequent to this trading update and prior to the full-year results announcement scheduled for later this summer could result in a reassessment of the carrying value of the contract asset, which could lead to a material impact on FY22 profits," it cautioned.
Publication of the results for the year to end-March 2022 has been delayed by six to eight weeks due to the ongoing strategic review in Germany.
The company said it is considering several options in connection with the review of its German business.
Shares in AO World slumped 19.79% to 70.10p.