AO World benefits as COVID-19 encourages online purchases

Following today’s release of AO FY figures for 2019/20,

Zoe Mills, Retail Analyst at GlobalData, a leading data and analytics company, comments:

‘‘AO World has produced a strong set of results in the UK while its European arm faltered – a reversal of fortunes for the electricals specialist compared to recent years, owing to the closure of its Netherlands proposition. UK revenue reached £901.6m in FY2019/20 increasing by 20.3% (including sales from its acquisition of Mobile Phones Direct), and growth also accelerated in its non-mobile proposition. While some of this was driven by the beginning of the COVID-19 pandemic resulting in an increase in demand for major kitchen appliances such as fridges and freezers, this strong result is indicative of consumers’ increasing willingness to buy big-ticket electricals online.

In FY2020/21, AO World will hope to report significant improvement in its European proposition, with its Netherlands operations fully closed by 31 March 2020. AO’s focus on profitability in its German stores is already beginning to pay off with the electricals specialist seeing an improvement in gross margin in the latter part of FY2019/20. Its sales in the region are likely to continue to struggle in the short term as it drives brand awareness but its focus on its German proposition remains the right move to ensure its international operations can become profitable in the long term.

The online pureplay has far outperformed the UK electricals market (which grew by 3.1% in 2019), growing its market share and placing AO World at number seven in the electricals sector. Its success is expected to continue into FY2020/21, with the retailer benefitting from the shift to online during the UK lockdown. AO World stated that even as non-essential stores have begun to open, the online market continues to perform well, boosted by the trepidation by some to return to physical stores. Continuing this momentum will be essential if it is to compete with Amazon (the market leader in online electricals) – and capitalising on its longstanding credentials in major kitchen appliances provides the best opportunity for AO, given this is an area of weakness for its competitor. Nevertheless, with the UK electricals market forecast to fall into decline in 2020, it will be a difficult year for not only AO World but the sector as a whole.”

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