AO is to close its German business as shoppers revert to pre-pandemic buying habits and focus on the UK market.
The Bolton-based company, which has been selling in Germany since 2014, says that while German shoppers shifted further online during the Covid-19 pandemic, they have since moved back to their previous shopping habits. At the same time the market has since become more competitive and expensive to operate in, with rising costs in areas such as digital marketing.
Following a review, it has now decided to close the business, which currently accounts for about 10% of its total group revenue, at a cost of between nil and £15m.
Instead, it will focus on the UK market, where it is a leader in the pureplay electricals market and where it has confidence in both its strategy and long-term prospects.
AO says in a statement today: “Having evaluated a range of strategic options during the review process, the board has decided that closure of the German business is the best course of action. This decision was based on the continuing deterioration in the outlook for the German business, 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 its customers, suppliers and employees.”
AO says it expects to continue to trade in line with expectations for the current financial year.
AO first announced the review of its German business in January, when it said that its German sales were down by 24% year-on-year in the third quarter of its financial year, contesting with a 12% fall in the UK market.
In a subsequent trading update, it said that it expected full-year revenues to come in at £1.6bn in the year to March 2022 – 6% lower than the previous year – and EBITDA to come in at about £8m, reflecting lower sales and higher logistics costs than the previous year, when it reported pre-tax profits of £20m.
AO is ranked Top500 in RXUK Top500 research.