UK retailer AO World reports bigger losses amid living costs crisis

The online electrical goods retailer AO World has reported bigger half year losses as it has been hammered by the cost of living crisis and supply chain problems.

AO, which sells kitchen appliances, mobile phones and laptops for home delivery, warned of tough times ahead, but raised its full-year earnings guidance after closing loss-making divisions and its German business. This drove its shares 15% higher, but they are down more than 40% so far this year.

The Bolton-based company reported a 17% drop in revenues to £546m in the six months to 30 September. Its pre-tax loss tripled to £12m from £4m in what it described as “a tough environment”.

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“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 by ongoing supply chain issues,” the company said.

Even so, AO said its sales were on track and that full-year profits would hit the top end of current guidance – £20m to £30m in adjusted Ebitda (earnings before interest, tax, depreciation and amortisation).

The group, the biggest seller of large domestic appliances in the UK, said it was conducting a “strategic pivot” towards cash generation and profitability.

Russ Mould, the investment director at the stockbroker AJ Bell, said: “First-half results from online electronics retailer AO World are being released in the calm before the storm which is Black Friday and Cyber Monday when the company will hope to be extremely busy.

“AO World was a pandemic winner whose fortunes have taken an alarming turn since, but these results hint that the company may have bottomed out and is ready to recover.

“The backdrop is undoubtedly difficult. Given the pressures on household budgets, people are putting off purchases of new appliances where they can, though to some extent if your washing machine or fridge freezer breaks down, a replacement is a non-discretionary item.”