AO World profits set to jump amid growth strategy progress
Online white goods retailer AO world is set to reveal a jump in profits after its growth strategy helped drive stronger sales.
The company has been undergoing a steady recover over the past three years after losses soared in 2022 in the aftermath of the Covid pandemic.
It is on track to deliver another improved performance when the online retail group reports its annual results on Wednesday June 18.
The group is expected to reveal a roughly 30% increase in underlying pre-tax profits, which could increase to as much as £44 million for the year to March.
Meanwhile, the company is also set to report that like-for-like sales grew by about 7% for the year.
Analysts at Peel Hunt are predicting it will hit sales of £1.11 billion for the year.
In its previous update in March, AO said the consumer demand was remaining 'robust' despite many households facing higher mortgage payments and energy bills.
Shareholders will be keen to see the group's outlook for the new financial year, as it also books higher costs following increases in the minimum wage and national insurance contributions.
AO previously said it expected April cost increases to leave the company with about £8 million in extra costs.
Analysts are, however, pointing towards continued profit growth despite the cost rise, with the group's growing membership operation an area which would help accelerate its sales.
Peel Hunt's John Stevenson said: 'AO's membership scheme is the glue that binds the group's widening capabilities across finance, mobile and pre-owned, and introduces MDA (major domestic appliance) customers to the full range of AO's non-MDA products.
'Get membership right and we believe AO can double its electricals market share, delivering 2.5 times current revenue and five times profit over 10 years, with sliding scale in between.
'The early developments of membership are showing good traction.'
Investors will also be keen to see AO's strategy for the Music Magpie business it bought last year for about £10 million.
AO World founder and chief executive, John Roberts, said adding the 'top-tier trade-in service' was 'essential' for the group.
Michael Hewson, analyst at MCH Market Insights, said: 'The acquisition of Music Magpie is expected to add £30 million of revenue, adding a modest loss into the full-year results.
'There should be greater clarity on how much this is likely to be with the risk of a potential impairment of up to £22 million.'
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