AO founder John Roberts today predicted that electrical shoppers had moved online for good after the business rebounded to an £18m profit when Covid-19 hit in the first half of its financial year.
AO World today reported revenue of £717m in the first half of its financial year – up by 57.6% on the same time last year. Its UK sales were higher, at £616.4m following growth of 53.9%, but its German business saw sales grow faster, by 85.2% to £100.6m.
Pre-tax profits of £18.3m in the six months to September 30 were 417.1% up from a loss of £5.9m last time. The group now expects that AO Germany will move into profit during peak trading, before posting a full-year profit in 2022 – and says the German market has moved online quickly over the last six months.
AO founder and 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 channels for customers and manufacturers alike and I am delighted by how our AOers have risen to the challenge of this structural shift in behaviour.
“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. Our growth rates have increased from Q2 to Q3 as we unlock capacity constraints. We have taken huge strides forward on our commitment to fix all the fundamentals of our European business and we now have a profitable platform from which to accelerate our growth in Germany and beyond.”
The retailer says that shoppers had to buy electricals online during the “unique set of circumstances” of the first Covid-19 lockdown – between March and June – but that demand did not ease when competitors’ shops reopened. It now says that about 70% of medium-sized domestic appliances sold in the UK in the first half of the year were acquired online.
AO has acted to raise its brand awareness through TV advertising and through the sponsorship of the Manchester Arena. In October it launched its first trial store in a branch of Tesco Extra and says that this remains in its “very early stages” despite an initial positive response.
It has also expanded the capacity of its logistics network by adding drivers, vehicles and warehousing.
AO’s own recycling operation was scaled back temporarily during the first lockdown but is now at full capacity. The retailer is talking to a number of manufacturers about cradle to cradle electricals, using raw materials from recycling plans to build new products and says that may help it offset volatility in pricing.
AO is ranked Top50 in RXUK Top500 research.