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AO World forecasts revenue jump in first half as pandemic accelerates shift to online shopping

The electricals and white goods retailer said sales momentum in the UK continued throughout its second quarter despite the reopening of competitor outlets, indicating what it believes is a “lasting step change in online penetration”

AO World PLC - AO World forecasts revenue jump in first half as pandemic accelerates shift to online shopping

AO World PLC (LON:AO.) has said it is expecting a revenue surge in its first half, saying the coronavirus pandemic has accelerated a structural shift to online shopping among consumers.

In a trading update for the six months ended September 30, 2020, the online electrical and white goods retailer said it expects revenues for the period to be around £715mln, up 57% year-on-year, with revenues in its UK and German markets rising 54% and 83% respectively.

READ: AO World's sales soar as retailer cites structural shift in shopping

AO said sales momentum in its UK retail business continued throughout the second quarter from the first despite the reopening of its competitor outlets, and that it believed there has been a “lasting step change in online penetration”.

The group said its German business has also performed strongly, reflecting changes made over the last 18 months as well as the demand boost from the pandemic. AO added that it is confident the business arm will achieve profitability on an adjusted underlying earnings (EBITDA) monthly basis as it trades through its peak period and will be profitable in 2022 and thereafter.

The firm said during the period of heightened levels of demand it has invested in infrastructure and teams to ensure “continued resilience” and that increased costs incurred from operational challenges have been offset by less competition in some market channels and additional delivery income. However, AO also said increased cashback redemption rates and cancellation of contracts with networks have negatively impacted our gross margin and that it has changed the mix of its customer proposition to minimise this risk in future.

"The last six months of trading have been like no other during my two decades in the business. AO was in good shape coming into this financial year and the global, structural shift in customer behaviour to online, accelerated by [coronavirus], emphasised our strengths. The progress that we've made in Germany gives us the platform and confidence to grow.  We remain excited by the opportunities ahead and ambitious to realise them”, AO founder and chief executive John Roberts said in a statement.

"Whilst we remain mindful of the uncertain economic climate caused by the pandemic and Brexit, we are on track with plans and well set for our biggest ever peak trading period in the UK and Germany", he added.

The update sent AO World shares up 6.7% to 247p in early deals on Thursday.

Quick facts: AO World PLC

Price: 291 GBX

LSE:AO.
Market: LSE
Market Cap: £1.39 billion
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