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AO sales increase at home and abroad, but losses widen as sales in more profitable categories stay flat

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AO says it is delivering on its long-term strategy
AO says it is delivering on its long-term strategy
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AO sales increase at home and abroad, but losses widen as sales in more profitable categories stay flat

AO.com parent company AO World has reported growing sales, especially in its European markets, but widening losses in the first half of its financial year. The pureplay retailer saw the growth as it widened its range to include smaller appliances, gaming consoles, mobile phones and smart home goods, but it said that trading in its more profitable large domestic appliance market had been challenging.

 

It is now looking to its “biggest ever” Black Friday sale in order to boost second-half figures.

 

AO World, which owns IRUK Top50 retailer AO.com as well as AO.de and AO.nl, reported a 9.9% rise in revenue in the six months to September 30, with sales of £404.2m up from £368m at the same time last year. AO website sales in the UK rose by 4.2% to £294.3m, taking total UK revenues up by 5.7% to £334.9m. Growth in UK retail sales, said AO World, came in newer categories, from audio visual through to computing, and via third party websites including eBay and Amazon. But business in its core major domestic appliances market stayed "challenging".

 

Revenue from its European operations rose by 35% to €78.4m (£69.4m), thanks to word of mouth recommendations and, again, sales through marketplaces. However, AO said that sales growth in the second quarter was affected by changes to its German driver operating model in line with changing German legislation.

 

Pre-tax losses of £10.3m widened from £9.6m at the same time last year as sales came in less profitable categories.

 

Moving beyond retail

AO World has now focused on services beyond the consumer-facing retail market, adding a B2B (business-to-business) team to give housebuilders, offices and landlords better ways to buy from it, and is also offering logistics for third-party retailers. Meanwhile, it expects to open a second fridge recycling plan in the South East in 2020. Together both plants will give it the capacity to process around 40% of all fridges collected in the UK. A plastics refinement facility will also enable it to sort and reuse plastics from those two plants, creating another “sustainable revenue stream”.

 

Chief executive Steve Caunce said: “This has been a half of continued delivery against our long-term strategy, thanks to a strong offer for customers. While our core UK and Germany MDA [major domestic appliance] markets have been challenging, with the UK MDA market becoming tougher than expected, we take encouragement that we are at least maintaining market share in this core category in the UK and growing significantly in Germany.

 

“Elsewhere, our continued focus on growing our range of online electrical and adding new complementary ranges proved successful int he first six months of the year, with newer categories such as audio visual and computing performing particularly well. Similarly, we are excited about further strengthening our customer offer through the acquisition of the UK’s leading online-only mobile phone retailer, Mobile Phones Direct.”

 

He added: “Our peak trading period began on 9 November with the launch of our biggest ever Black Friday and I remain confident of achieving long-term sustainable growth across the Group. We expect full year results to fall within the range of board expectations, albeit more second half weighted than previously anticipated.”

 

AO says a hard Brexit would be likely to affect its profitability as the cost of goods and of labour rise as customs checks increase and free movement comes to an end.

 

Image courtesy of AO World

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