It might be worn to the point it can't get the snow to the chute anymore. Hard to say. I've got one of these too. The two piece molded rubber augers on these Ariens units used to be designed such that you can't get the mounting wrong, Not sure on newer ones.
I've got an older Ariens SS stage unit I bought at a yard sale some years back. Mine had a similar gap that I thought was too much and the plastic scraper was worn so I bought a new ~$75 rubber auger assembly and I forget how much the replacement scraper was for it. The original was worn just past the max wear indicator. Anyway.. It didn't throw snow substantially better with the new parts. I put too much $ into it thinking it would be great. Put new wheels on it even, because they were all wallowed out. The auger shaft bearings roll OK, but could also use replacing. Didn't work near as well as the 2-stroke Toro SS I had for awhile, so I tossed this Ariens in the storage loft in my garage.