AO World raises profit forecast despite ‘Morecambe and Wise Summer’

AO World has upgraded its profit outlook despite poor weather which has led to a ‘Morecambe and Wise summer’ for the group’s sales.

The white goods retailer now expects to make an adjusted pre-tax profit of between £39 million and £44 million this financial year, after previously expecting £36 million to £41 million.

The Bolton-based company saw pre-tax profits rise 30 per cent to £17 million in the six months ending September, boosted by a focus on costs and efficiency.

This is despite sales growing just 6 percent to £512 million, partly due to lower mobile revenues and weak demand for cooling products in consumer retail.

John Roberts, who founded AO World in 2000, said: ‘We had a Morecambe and Wise summer sale; all the right volumes, just not in the right categories.

‘Due to the wet summer weather, we sold fewer refrigerators, air conditioning units and more tumble dryers than we had planned.

“Overall, our team did a fantastic job bringing this to a satisfying draw.”

Roberts added: ‘Our laser focus on costs and efficiency remains, ensuring that, as planned, profits grew faster than sales on the growth we achieved.’

AO World’s results come as it awaits approval for its £10 million takeover of second-hand electronics retailer MusicMagpie.

The Financial Conduct Authority and MusicMagpie shareholders have given their consent, but AO World still needs court approval before the takeover can be completed.

MusicMagpie sells everything from textbooks to laptops, smartwatches, mobile phones and Xbox consoles, and offers subscription services that allow Brits to rent electronics.

Three years ago it was listed in London at a valuation of more than £200m, but this has since fallen by more than 90 per cent due to the end of Covid-related austerity, cost of living pressures and huge competition in the market for used products.

Telecoms giant BT Group and Footasylum owner Aurelius both considered taking over the company last year before walking away without explanation.

AO World believes that the acquisition of MusicMagpie will increase trade-in options for its customers and mitigate risks arising from the shift towards ‘durability and repair’ in the consumer technology market.

Dan Coatsworth, investment analyst at AJ Bell, said: ‘The market will be closely watching whether (the acquisition) is a step too far outside its comfort zone – or an opportunity to bring its logistics capabilities to the table to turn this company into a to make success. real asset.’

Roberts set up AO World a few months after a good friend bet him £1 in a pub that he could start a business.

The company saw significant growth during the early part of the pandemic thanks to strict trading restrictions that saw more people buying their electrical and home appliances online.

However, the company began to struggle when sales began to decline as stores reopened and rising inflation made customers more reluctant to buy expensive items.

AO World has since returned to profitability after embarking on a turnaround plan, which included cutting senior and middle management jobs, closing its operations in Germany and launching a £40 million fundraising round.

AO World shares were down 1.5 per cent at 108p on Tuesday afternoon, although they are still up around 29 per cent over the past 12 months.