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AO World posts double-digit sales growth for year just gone but remains “cautious” on outlook

AO isn’t the only UK retailer struggling in its home market at the moment, Carpetright, Topps Tiles and Dunelm have all posted weaker updates in recent weeks
AO distribution centre
The UK accounts for 85% of AO’s total revenues

Electronics retailer AO World PLC (LON:AO.) has told investors it remains “cautious” about the year ahead despite reporting double-digit sales growth for the year just gone.

Revenues climbed 14% to £796.8mln in the year ended 31 March 2018 (2017: £629.7mln), with UK sales – the group’s core market – rising 8.1% to £680.8mln.

UK retailers struggling

Turning the higher sales into increased profitability is proving difficult, though.

The Bolton-based group reported an operating loss of £16.2mln (2017: £12.0mln), largely due to investment in its European expansion and a weaker UK electricals market where it has had to cut prices to remain competitive.

Retailers up and down the country have been hit by rising costs and a slowdown in consumer spending as the pound’s post-Brexit fall has fed through.

A host of other home retailers, including Carpetright PLC (LON:CPR), Topps Tiles Plc (LON:TPT) and Dunelm Group PLC (LON:DNLM), have all posted weaker updates in recent weeks.

Things look more positive in Europe, where sales grew 55% to £116.0mln (2017: £71.5mln) despite “minimal traditional marketing activity”.

Decent start to new year

Chief executive Steve Caunce said it had been “another year of good progress” for AO despite a “very competitive” UK market.

He added: “The new financial year has started well in both the UK and Europe, with UK revenue growth returning to double-digit levels against prior year.

“Whilst we remain cautious on outlook given economic and competitive pressures on the UK electricals market we are confident of achieving our stated goals of future growth in the years ahead.”

Shares rose 2.2% to 156p in early deals on Tuesday.

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