AO World, a British online consumer electrical retailer, has announced its plans to increase its full-year profit expectations after returning to profit in the first half. Despite a decline in sales due to challenging market conditions, the company was able to offset this with reduced costs and improved margins.
Inflation is falling in the UK while borrowing costs remain high, and the housing market is slowing down. This has put pressure on big-ticket expenditure, making it difficult for consumers to spend money on discretionary items like household appliances and electronics. AO reported a pretax profit of 13 million pounds in the six months to September 30th, compared to a loss of 12 million pounds in the same period last year. This was despite a 12% fall in revenue to 482 million pounds.
For the full year of 2023/24, AO forecasts a pretax profit range of 28 million pounds to 33 million pounds. This represents an improvement from its previous guidance of around 28 million pounds. The company also expects full-year revenue to decrease by approximately 10%.
Despite these challenges, AO remains optimistic about its future prospects and intends to continue investing prudently in the business while seizing significant market opportunities. In June, AO formed a strategic partnership with Mike Ashley’s Frasers sportswear and fashion group, which made Frasers their biggest shareholder with a 22.1% ownership stake. As a result of this partnership, AO shares have increased by an impressive 60% year-to-date.
Overall, AO World has been able to navigate challenging market conditions and return to profitability in the first half of the year thanks to its focus on cost management and margin improvement strategies. The company remains committed to continuing these strategies as it looks forward to capitalizing on new opportunities that will drive growth over the long term.