AO World profits at ‘top end’ of guidance despite cost pressures

Dan Coatsworth, head of markets at AJ Bell, said: “Four years since retreating from Germany with its tail between its legs, electricals retailer AO is firmly back in growth mode thanks to robust UK trading.

“Importantly, profits are growing ahead of sales which implies it is running a tight ship and coping with material cost pressures.

“Selling washing machines and fridges online is a low margin game, yet AO has found a way to make money thanks to having fingers in many pies, including recycling and renting out electrical goods.

“Customers seem happy, judging by online review scores, and management is upbeat.

“With the UK operations seemingly in a good place, it wouldn’t be a surprise to see AO weigh up bolder ways to accelerate its growth over the next year or so.

“For now, there are potential headwinds on the horizon that could challenge AO as the year progresses.

“A spike in energy and shipping costs raises questions around whether product prices will have to go up and whether consumers will be able or willing to pay more, particularly for non-essential items.

“The cost of living is clearly going up, given the knock-on effects of what’s happening in the Middle East, and consumers might need to think carefully about where they splash their cash.

“A broken fridge or washing machine would be a no-brainer to replace, but upgrading a TV, phone or laptop might be an obvious thing to delay for a while.”