AO to close German business because of continuing poor results

Online electricals retailer AO has confirmed plans to close its German business.

The company said its decision was based on the “continuing deterioration in the outlook” for the division as well as the board’s “responsibilities to shareholders and other stakeholders”.

The German business, which was launched in 2014, accounts for about 10% of its overall revenue. AO said its closure could lead to costs of up to £15m.

READ MORE: AO launches strategic review of German business as competition and costs rise

A statement issued to the London Stock Exchange said: “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, a substantial increase in digital marketing costs, and a constrained supply chain.

“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.

“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.

“The German business currently represents c.10% of AO’s total group revenue. It is expected that its closure will incur cash costs of between nil and £15m.

“AO will now increase its focus on its leading online position in the UK electricals market and optimising the group’s profit and cash generation potential.

“Given the strength and scale of the AO business model, its market-leading, consistently high levels of customer satisfaction, and the structural market trends towards online retailing, the group continues to have confidence in both its strategy and its long-term prospects. Further details of strategic initiatives will be discussed at full year results.

“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.”