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Expansion into new categories and partnerships offers growth for AO as it reports FY22 decline

Image courtesy of AO

AO is to concentrate on growing its UK market through category expansion and partnerships with other retailers. As part of a strategic refocus, which also sees AO closing its German business, the electricals retailer is extending further into selling televisions, laptops, audio visual and small domestic appliances. This increases its addressable market in the UK to £23.4bn.

AO is also continuing its partnerships working with other retailers and brands on logistics and recycling services. It has signed an agreement with Homebase to supply, install and recycle appliances. Homebase has agreed to purchase major domestic appliances and audio-visual equipment exclusively from AO over an initial five-year term. AO is discussing similar partnerships with other kitchen retailers.

To date, AO’s recycling facilities have processed more than five million appliances, including two million fridges. Revenues from this business stream have increased 36% year-on-year. The company is working with manufacturers to use its recycled plastic in new products.

Full-year results

The update comes as the group announced revenue growth of 52% compared to its pre-Covid FY2020 period. Revenue in the UK in the past year has been “resilient” with a one year-on-year decline of 5%. Total group revenue of £1,557m for the full year to 31 March 2022 is down 6% on the previous year’s £1,661m but shows growth of 52% over FY 2020.

Group EBITDA of £8.5m was impacted by increased staff costs added during Covid in H2 FY21 as well as increased marketing and logistics costs. AO ends FY 2022 with a statutory loss before tax of £37m, compared to a FY21 profit of £20m.

 “The past 12 months has been a turbulent time for business and for retail in particular, and AO hasn’t been immune to those effects. Looking ahead, we certainly have more volatility to navigate, but the core fundamentals of our business remain strong. We entered the new financial year with a period of strategic realignment, and a focus on cash and profit generation,” says AO’s founder and chief executive, John Roberts.

AO, which was founded on the belief that online is a better way to buy electricals, has a 32% share in the UK’s online major domestic appliances market. “That belief is as strong as ever, even – and especially – as we go through one of the most challenging operating environments we’ve weathered as a company,” Roberts adds. Customer satisfaction and repeat purchase rates are growing. Over two years, AO has increased its customer base by more than four million, with repeat purchase rates outperforming pre-Covid levels. Over 350,000 Trustpilot ratings average 4.6/5 stars and AO’s net promoter score is 86.

AO is ranked Top500 in RXUK Top500 research.

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