AO World plc (AO), the online electricals retailer, has decided to close its German business due to the “continuing deterioration” in the outlook for the German arm, as well as the board’s responsibilities to shareholders and other stakeholders.
The business will continue to trade for a brief period to facilitate a structured and orderly closure for customers, suppliers and employees. Meanwhile, AO will now increase its focus on its online position in the UK electricals market and optimising the group’s profit and cash generation potential.
AO’s board said the closure is the “best course of action”, despite the German business currently representing c. 10% of AO’s total group revenue. Overall, the closure is expected to incur cash costs of between nil and £15m.
Overall, the group said that its business model, customer satisfaction levels, and the structural market trends towards online retailing, gives the group confidence in both its strategy and its long-term prospects.
Previously, on 27 January 2022, the group announced a strategic review of its German business as a result of material changes to the local trading environment which have “significantly” impacted the business over the past year.
These included an “intensifying” competitive landscape as customers have returned to pre-pandemic levels of online shopping, an increase in digital marketing costs, and a constrained supply chain.
AO said: “The board wishes to thank all the employees in AO’s German business for their hard work and dedication since we launched the business in 2014.
“Whilst remaining mindful of the uncertain macroeconomic context in the UK and the continuing global supply chain challenges, the group’s UK business continues to trade in line with the board’s expectations for FY23.”