Online & Digital

AO to review German business following revenue hit

It cited an intensifying competition in the online market as one of the reasons for its revenue hit in Germany

AO has launched a strategic review of its German business after it was hit by supply chain issues and rising marketing costs. 

It comes as group revenue fell by 14% in the quarter ended 31 December on a one-year basis, reporting a rise of 45% on a two-year basis.

Its UK business fared best, as UK revenues also grew 47% in the quarter on a two-year basis and fell by 12% on a one-year basis. Despite lockdowns and supply chain constrictions, on a one-year basis UK revenues remained broadly stable with a fall of only 1% in the nine months ended 31 December. 

In Germany, however, while Q3 revenues grew 35% on a two-year basis, on a one-year comparative for the same period, revenues fell by 24%. On the nine month period, revenues fell by 8%.

The group noted its German business was “significantly impacted” by a number of recent changes to the local trading environment. It cited an intensifying competition in the online market as one of the reasons for its revenue hit, whilst noting online penetration returned to pre-pandemic levels.

In addition, digital marketing costs “substantially increased” against pre-pandemic levels while the supply chain in Germany remains constrained. AO said it “expects these trends will continue for the foreseeable future in the German market”.

The group said: “The board is focused on maximising shareholder value, and as a result of the aforementioned factors, the group has decided to commence a strategic review of its German business, which will evaluate a range of options. The results of the review will be announced in due course.

“We remain confident about AO’s long-term growth prospects, driven by the strength of our proven business model, the quality of our customer proposition, and the long-term market trend towards online migration.” 

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