Key Sentence:
- AO World, an online electricals retailer, has warned that Xbox and Playstation game consoles, as well as iPhones, may be in short supply this Christmas.
- A global shortage of computer chips has hampered their availability.
AO warned that these shortages and supply chain issues would have a negative impact on its profits during the holiday season. The retailer’s sales skyrocketed during the lockdown, but that meteoric rise has been stifled by higher labour and transportation costs.
The critical festive trading period, according to AO, will be “significantly softer” than anticipated. As a result, the company reported a half-year pre-tax loss of £10 million on Tuesday, down from an £18 million profit last year’s same period.
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This caused AO’s share price to plummet by about 25% on Tuesday, though it had recovered slightly by late morning to stand about 15% lower. According to AO, the nationwide lorry driver shortage that has impacted many companies remains a problem.
It had hired 500 new drivers to help with labour shortages, but it still faced “significant supply chain challenges,” product shortages, and higher costs and freight costs. “We planned for continued revenue growth at the start of our fiscal year in April and built up our cost base accordingly,” AO said.
“However, growth in the UK has been hampered by a nationwide shortage of delivery drivers and ongoing disruptions in the global supply chain, and competition in the German online market has increased significantly.”
“As we look ahead to the second half, we continue to face significant supply chain challenges, including low availability in certain categories, particularly in our newer products, where we have less scale, experience, and leverage.” As a result, many companies, from toy, food, and clothing retailers to furniture behemoth Ikea, have warned of labour shortages, higher prices, and supply disruptions.
Due to supply chain delays, technology retailers warned over the weekend that they might not have enough stock to meet Black Friday’s demand.
AO World, which sells a wide range of electrical goods such as laptops, washing machines, and mobile phones, predicted that the “all-important” holiday season would be far more complex than it had anticipated just a few weeks ago.
Source: BBC News
