AO World shares close 30 per cent up as online sales electrify

AO World shares close 30 per cent up as online sales electrify

Summary

  • A strong trading update soared the share prices of AO World
  • The online electrical goods retailer forecasted a more than 50 per cent jump in group revenue.
  • Sales rose, despite competitors reopening their physical stores in Summer after the lockdown restrictions were eased.
  • On 24 November, AO World is expected to release its interim results for HI 2020.

 

The share prices of AO World Plc (LON: AO.) moved up to finish the day at £302.50 on 15 October 2020, skyrocketing around 30 per cent from its opening price of £241.50. The online electrical goods retailer released a trading update that seemed to have cheered the investors. In its upbeat trading update for the six months ended 30 September 2020, AO World expected group revenue to be around £715 million, a jump of 57 per cent year-on-year (YoY).

On 16 October 2020, at 09.00 AM, the company’s stock was trading at £301.00 down 0.33 per cent from its previous day’s close. On a year to date (YTD) basis, AO World’s share provided a positive return of 252.56 per cent.

The online retailer emphasised that there has been an upward sales momentum at the company. Sales rose, despite physical stores of competitors started reopening at their outlets from summer when the government eased the coronavirus lockdown restrictions. It is to be noted that many Britons have continued to work from home during the pandemic. This has potentially led to an increase in sales of home office products and electrical goods in recent months.  AO World observed that the lockdown had activated a major shift in consumer behaviour and felt that this bigger than usual change of shopping online would remain for coming times as well.

In the company’s half year trading update, while the revenue for the UK scaled up by 54 per cent, the revenue for Germany grew by 83 per cent on a constant currency basis. AO World informed that in its UK retail business, there has been an impetus in sales momentum that continued from first quarter (Q1) to the second quarter (Q2). In the first half, the retailer noticed a change in the behavior of some customers in its mobile business. The rise in cashback redemption rates as well as contract cancellation with Networks brought a downward impact on the gross margins. For reducing such risks in future, AO World changed the mix of its customer proposition.  

The online electrical retailer’s German operations too continued to perform in a healthy way. The rise in sales in the European country reflected the outcome of certain changes undertaken in the past one and a half years, in addition to the surge in online shopping due to the coronavirus pandemic. The company said that the performance showed the growing advantages of its One AO approach. 

The retailer noted that it remained confident that this business would bring profitability on an adjusted EBITDA monthly basis as it would trade through the peak season. AO World added that in financial year 2022 (FY22) and thereafter, the company would be profitable.

John Roberts, Founder and Group Chief Executive at AO World expressed his gratitude to all AO World employees and delivery partners who worked safely and tirelessly to service its customers during the challenging period. Despite remaining aware of the ongoing uncertain economic environment caused by the pandemic and Brexit, Roberts said that the company is on track with its strategies and prepared for its biggest ever peak trading times both in the UK and German markets. Talking specifically about the progress made in the German market, he mentioned that it provided the online retailer both a platform and confidence to grow. 

 

Also read: Online Buying: Jump In AO World’s Revenue; AO World, Kingfisher, Hermes, And DPD To Increase Hiring

Also read: Lens on Tesco And J Sainsbury As UK Retail Sales Growth Hits Highest Since April 2019

Also read: Asos share falls despite 329 per cent rise in profit, cautions on consumer spending

 

During the pandemic, AO World’s priority remained safety and wellbeing of its staff, customers, suppliers, and partners. The company made investments in its infrastructure and teams to ensure continued flexibility, besides maintaining high levels of customer service to further strengthen the changing customer preference for online shopping.

The rise in costs due to operational challenges was offset by lesser competition in some of its marketing channels and income from successful deliveries of demand. On 24 November 2020, AO World  is likely to release its interim results for the six months ended 30 September 2020. 

 

Stock performance

AO World is an online electrical goods retailer operating both in the UK and Germany. On 16 October 2020, at 09.00 AM, the company’s stock (LON: AO.) was trading at £301.00 down 0.33 per cent from its previous day’s close of £302.50.

The 52 week low high range was recorded as 50.00 and 302.50 and it had a market capitalisation (Mcap) of £1,447.59 million. The total volume of shares traded at the time of reporting was recorded at 416,496.

Finally, the coronavirus pandemic has significantly accelerated online sales across all categories, ranging from groceries, fashion, other items of daily needs and electrical goods. Several experts believed that besides the ease of shopping at home and hassles of delivery, online platforms provide a wider range of options to the customers. The retailers need to ramp up their online operations to meet the changing needs of the customers. Besides the product offerings, the retailers should focus on timely delivery and competitive pricing to gain and sustain a larger market share.

 

 

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