Electricals retailer AO World says cash-strapped Britons cancel warranties

·2-min read
AO distribution centre in Crewe

By Shanima A and James Davey

(Reuters) -Britons are cancelling repair warranties on domestic appliances to save money as soaring inflation dents their disposable income, online electricals retailer AO World said on Friday, as it issued its third profit warning in six months.

AO, which sells washing machines, fridges, cookers and televisions, said that last month it was notified of higher warranty cancellations than average historical trends as customers responded to the escalating cost of living.

The company based in Bolton, northern England, said the picture had improved since March, but cautioned that data on warranties received prior to publication of full-year results this summer could have a further material impact on profit.

Surging prices are causing the biggest squeeze on UK household incomes since at least the 1950s and consumer confidence is at near record lows.

Almost a quarter of people in Britain said it became harder to pay household bills even before increases in regulated energy prices took effect, an official survey published on Monday found.

As Britons seek ways to save cash, data has shown they are cutting back on streaming services and buying more cheaper own-brand food from supermarkets.

Shares in AO were 19% lower at 0910 GMT, extending losses over the last year to 75%, after it forecast year to March 31 core earnings, or EBITDA, of about 8 million pounds ($10 million), down from expectations in November of 10-20 million pounds.

Full-year revenue was expected to be 1.56 billion pounds, down 6%.

"In view of the volatile market conditions, inflationary cost pressures and logistical challenges in the supply chain, together with the escalating cost of living for consumers, we remain cautious about our revenue and profit outlook in the near term," AO said.

Rival Currys in January trimmed full-year profit guidance by 3%.

AO has been reviewing the future of its struggling business in Germany.

"The strategic review is continuing, and a number of options remain under consideration by the board," it said.

($1 = 0.7956 pounds)

(Reporting by Shanima A in Bengaluru and James Davey in London; Editing by Sherry Jacob-Phillips, David Goodman and Barbara Lewis)

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