Sales surge at online household goods retailer AO World

·2-min read
Photo: AO World
Photo: AO World

Online electrical retailer AO World (AO.L) said it saw a significant increase in demand for its products amid the coronavirus pandemic, experiencing its “strongest ever peak trading period” in the 2020 holiday season.

However, the company, which said it incurred higher costs due to operational challenges amid other problems, saw its shares plunge roughly 6% on Tuesday morning.

AO World's stock took a hit Tuesday morning. Chart: Yahoo Finance
AO World's stock took a hit Tuesday morning. Chart: Yahoo Finance

In the three months to 31 December 2020, the firm said it recorded year-on-year UK revenue growth of 67.2% to £457.3m ($622m) and of 77.4% to €73.6m (£65.5m, $89m) in Germany.

CEO and founder John Roberts, said: "I believe we've seen ten years of change in ten months.”

He said the company invested early in warehouses, vehicles, stock and people, hiring 1,500 people in 2020, which “not only set us up to satisfy customer demand for electricals for the current crisis but also for the longer term, as the structural shift to online becomes a permanent feature of the market in the UK and Germany.”

"Now that customers have experienced a better, digital-first way to shop for electricals, I believe the majority will never look back,” he added.

Dispite the upbeat report, shares were down.

Talking about challenges, Roberts said AO World “incurred significantly higher costs as we negotiate some of the operational challenges of working in a COVID-19 compliant environment, particularly in the reverse supply chain.”

READ MORE: AO sees revenue surge as demand rise during COVID-19 pandemic

The company saw “a slightly increased rate of cancellation of individual consumers' long term contracts in mobile and warranties, driven by COVID-19 impacts on customers behaviour.”

Back in November, AO said it saw revenue leap more than 50% to £717m compared with the same period in 2019.

Strong revenue growth was largely driven by sustained demand in Germany and the UK, the company said in its half-year report published on Tuesday.

At the time, Russ Mould, investment director at AJ Bell, said “a key sales tailwind could disappear, meaning AO will have to work hard to keep the customers it won during lockdown by encouraging them to buy other goods, as well as find ways to recruit more customers. That won’t be easy.”

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