AO World swings to profit as working from home boosts revenue more than 50 per cent
Online electricals retailer AO World swung to profit in the six months to September, as a surge in domestic appliance sales during the pandemic helped revenue rocket more than 50 per cent.
The company, which sells washing machines, fridges, TVs and laptops, said sales in the six months to 30 September jumped 53.2 per cent to £717m — up from £468m in the same period last year.
Pretax profit swelled to £18.3m, pushing the company into the black from a loss of £5.9m last year.
The FTSE 250-listed company saw online demand catapult as high street retailers remained shuttered during two nationwide lockdowns during the pandemic.
Chief executive John Roberts said: “This has been a half year like no other. I believe our market has changed as a result, forever. Online is now the dominant retail channel for customers and manufacturers alike.”
The group noted that the coronavirus crisis had accelerated a “step change” in the electricals market, with the brand taking pains to cement its reputation as a leader in the sector.
AO said it has taken advantage of cheaper advertising slots and returned to TV via a targeted advertising campaign.
The group last month launched its first trial store within a Tesco Extra store “with the aim of growing AO brand awareness”, as well as signing a five year deal to be the headline sponsor of the Manchester Arena, which has been officially renamed the AO Arena.
AO said its main focus in the six months to 30 September was on fulfilling increased customer demand in the core retail channel, which forced it to delay the full launch of AO Mobile which is now planned for 2021.
“The shift to online is not just a UK phenomenon; it is across the world. European online electrical markets are less mature than the UK therefore presenting us with a significant opportunity on which to capitalise,” the group said.
“Still, there are headwinds, not least in the macroeconomic climate, including the threat of Covid-19-related recessionary behaviour and Brexit from January 2021,” said Roberts.
“We have grown share across all categories and the results we’re announcing today give huge confidence that our business is well set for the future to cement the changes.”
AO World shares dipped 7.6 per cent despite the news, though shares have risen by an extraordinary 382 per cent in the year to date.
Richard Hunter, head of markets at interactive investor, noted that the company’s success is a sign of a “permanent shift” to online for domestic appliance retailers.
“Companies suffering from the impact of the pandemic are easy to find, particularly in the retail space. On the other hand, for those reaping extreme benefits, it is unnecessary to look any further than AO World,” said Hunter.
“Bulls of the stock will also be heartened to hear that the company believes the growth in online purchases, particularly for its major domestic appliances, represents a permanent shift in consumer habits.
“It remains to be seen whether the meteoric rise can be continued, but for the moment an increase in the share price of 382 per cent over the last year, as compared to a dip of 4.4 per cent for the wider FTSE 250, has rewarded shareholders handsomely.”