Anticipating Brexit disruption, AO World doubles warehouse capacity

By James Davey

LONDON (Reuters) - British online electricals retailer AO World, whose sales have soared during the pandemic, has doubled its warehouse capacity to cope with any supply chain disruption at the end of Britain's Brexit transition period with the European Union on Dec. 31.

AO sells washing machines, fridges, cookers and televisions, as well as mobile phones and printers.

Its founder and chief executive John Roberts said the main challenge for the group from Brexit was supply chain disruption rather than overall market demand.

"We've about doubled our warehousing capacity and we've placed orders to hopefully fill that capacity, to insulate customers from that disruption," he told Reuters on Tuesday. "But we can't give any guarantees on that."

AO was already seeing some supply chain disruption at ports such as Felixstowe in eastern England, he said.

Britain is 37 days away from the end of a Brexit transition period, after which EU rules that ensure free movement of goods between Britain and the EU will cease to apply.

Talks on how to replace EU rules and keep goods flowing freely have yet to reach agreement.

Roberts said disruption from Jan. 1 was unlikely to be for just a few days. "Supply chains tend to take a bit of time to work through," he said.

SALES SOAR

AO, which operates in Britain and Germany, swung to a first-half profit after a 53.2% jump in revenue.

The group has benefited from people working from home during the crisis, which has driven demand for electrical appliances and home office products.

AO has also benefited from store-based rivals being closed during national lockdowns.

Its shares, which have more than quadrupled in value this year, were down 4.8% at 0951 GMT.

Pretax profit was 18.3 million pounds ($24.5 million) in the six months to Sept. 30 versus a loss of 5.9 million pounds a year earlier.

Revenue was 717 million pounds, and growth rates have increased in the third quarter.

"This has been a half year like no other. I believe our market has changed as a result, forever. Online is now the dominant retail channel for customers and manufacturers alike," said Roberts.

He forecast a record Black Friday (Nov. 27) performance from AO and for the overall electricals market.

He also said AO's German business was on track to achieve monthly profitability on a core earnings basis during the peak trading period, and was expected to be profitable from full year 2022.

($1 = 0.7476 pounds)

(Reporting by James Davey; Editing by Kate Holton, Keith Weir and Jan Harvey)