Online electricals retailer AO World plc is to close the German arm of its business.

In January the group announced a strategic review as a result of material changes to the local trading environment which it said had significantly impacted its German business.

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,” the company stated. 

“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 around 10% of AO’s total group revenue. It is expected that its closure will incur cash costs of between nil and £15 million.

AO is led by CEO and founder John Roberts and employs more than 4,000 people. 

The company’s share price has fallen 2.5% in the last two hours since releasing the statement to the London Stock Exchange. Its market cap is around £342m, with the share price at 72 pence having hit an all-time high of 429p at the height of the COVID-19 pandemic.

The group added: “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.”