Black Friday brings joy for Bolton online retailer

Bolton-based online electrical retailer AO World said it achieved its highest ever sales month, last November, in a third quarter trading update to December 31, today.

It said group revenues rose by 8.2% compared with the same period last year, including a 4.4% rise in UK revenues a 31.3% jump in Europe sales.

And the statement said AO World remains on track to deliver its long-term strategic plan and the board’s expectations for the full year remain unchanged.

Customers responded positively to AO’s UK seasonal Black Friday offer.

The company said this peak trading period continues to be popular with its customers.

“Our offering of Black Friday deals over a longer time period in November was well received by customers, sales flow was smoother and our margins improved. This contributed to overall UK revenue growth of 4.4% for the quarter,” it said.

Revenue growth in the European business was 31.3% for the quarter on a constant currency basis.

As anticipated, this was stronger than the second quarter growth rates as the group returned during the period to underlying growth levels following the impact of changes made to the driver operating model during the first half of financial year 2019.

As previously announced the company completed the acquisition of Mobile Phones Direct on December 17, in line with AO’s strategy broadening the categories offered for sale in the UK business.

The revenue figures in this announcement exclude the newly acquired entity.

AO World chief executive, Steve Caunce, said: “Against a challenging backdrop, Q3 represents a solid performance across the AO Group.

“We are on track with our plans as we continue to provide a great proposition for our customers.

“I am particularly proud of the hard work of the teams in the UK and Europe in this critical trading period which saw a record numbers of customers choose AO for their Black Friday and seasonal electricals purchases.”

Russ Mould, investment director at Manchester investment firm AJ Bell commented: “If you had to pick a retailer vulnerable to a poor Christmas trading update, AO World would have certainly made the list for many people given its troubled history.

“However, it somewhat surprises with a fairly decent performance in the last three months of 2018.

“Record sales in November were linked to running Black Friday deals for a longer period in November.

“Normally heavy discounting would have a greater benefit to revenue than profit. However, AO World says margins improved in the trading period. European sales growth also improved quarter-on-quarter.

“The key issue remains the lack of profit in the business.

“Sales growth is only positive if there is something left for the company after covering costs of goods and running the business.

“It still needs to increase scale in Europe and the UK market remains highly competitive, which means a lot of money will have to be spent on marketing to make sure its brand is front and centre when consumers are thinking about where to buy their electrical goods.”

He added: “At the moment analysts don’t expect AO to report a pre-tax profit until the financial year ending 31 March 2020.

“Investors have been patiently waiting for this magic earnings breakthrough moment ever since the business joined the stock market five years ago.

“For now, investors should be very relieved there is no reason to downgrade earnings forecasts and that there is a new sense of momentum in the business.”