Online electrical retailer AO World posted larger half-year losses as it was hammered by the cost-of-living crisis and supply chain issues.
AO, which sells kitchen appliances, cellphones, TVs and laptops for home delivery, warned of tough times ahead but raised its full-year profit forecast after the closure of loss-making divisions, including its German operations. That sent its shares up 15%, but they are down more than 40% so far this year.
The Bolton-based company reported a 17% drop in revenue to £546million in the six months to September 30. His pre-tax loss tripled from £4m to £12m in what he described as “a difficult environment”.
“We are of course not immune to the challenging and uncertain consumer environment, and we expect to continue to be impacted by both the cost of living crisis affecting consumer spending, as well as ongoing supply chain issues,” the company said.
Even so, AO, the UK’s biggest seller of major appliances, said its sales were on track and full-year profits would top current forecasts – £20-30m from EBITDA. adjusted (earnings before interest, taxes, depreciation and amortization).
AO Founder and Managing Director John Roberts said: “The majority of what we sell is distress buying, not discretionary buying. If your fridge-freezer breaks down, you’re unlikely to wait until next summer to replace it.
He added that “the energy crisis is making people…trade up a bit” to buy more durable appliances that use less energy.
Roberts was confident that AO would weather the recession well. “This is not our first rodeo in terms of recessions. We’ve been around for 22 years and we have a handbook of what to do in a recession. I called it nine to twelve months ago.
Russ Mould, chief investment officer at stockbroker AJ Bell, said: “Online electronics retailer AO World’s first half results are released in the calm before the storm which is Black Friday and Cyber Monday, when society expects to be extremely busy. .
“AO World was a pandemic winner whose fortunes have since taken an alarming turn, but these results suggest the company may have hit rock bottom and is ready to turn around.
“The backdrop is undoubtedly difficult. Given pressures on household budgets, people are postponing purchases of new appliances where they can, although to some extent if your washing machine or fridge-freezer breaks down, a replacement is an item not discretionary.