Bolton-based online electrical retailer AO World plc announced it will close its German business “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 German business currently represents 10% of AO’s total group revenue, and the closure will incur cash costs of up to £15 million. 

AO shares fell about 3% and are down 70% for the past 12 months.

AO World said in a stock exchange statement: “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 …

“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.”