AO sees double digit MDA growth and becomes “proud lifeline” for customers during lockdown

AO World has said it experienced strong demand during the COVID-19 crisis but was cautious about the outlook as it reported a smaller annual loss.

The online appliance retailer’s operating loss for the year to the end of March 2020 narrowed to £3.8m from £13m as total revenue rose 15.9 per cent to £1.05bn. Total UK revenue was up 20.3 per cent to £901.6m (excluding revenues from the Mobile Phones Direct business).

MDA growth in the UK was 9.1 per cent year on year, but that increased to 19.9 per cent in final quarter of AO’s financial year.

Addressing the implications of the COVID-19 pandemic in both the UK and in Germany, AO said the crisis had converted many customers to online shopping but warned that shrinking economies, fewer housing transactions and a hard Brexit could hit sales.

Chief Executive and Founder of AO, John Roberts, who returned as CEO in early 2019, has been expanding the company’s UK operations.

“I’m pleased that we have made substantial progress, closing the year in good shape after getting AO fit and focused on the future,” he said. “That progress ensured that we were in the best possible shape when COVID-19 hit. Investing to make sure our operations were safe so that our customers and people were protected allowed AO to be a proud lifeline for customers during lockdown.

AO John Roberts WP
AO Chief Executive and Founder, John Roberts

“Many experienced AO for the first time and were delighted with what they found,” Mr Roberts added, saying that COVID-19 had accelerated a shift in customer behaviour towards online shopping and that the company needed to “cement that change”.

In addition, with the closure of physical stores, the retailer said: “The products we sell are an essential part of people’s lives and the electricals market migrated to nearly 100 per cent online overnight.”

As a result, it reported that it made “significant market share gains” across many of its key categories from the start of lockdown in the UK, with sales “above expectations”.

Despite this, AO also faced continued inefficiencies and cost increases due to changes in its logistics operations. Its distribution network remained open during the full lockdown period, but during this time the majority of its installation services were paused. Since social distancing measures have been eased, most of these services are being offered again.

Elsewhere, the pandemic presented supply challenges in AO’s recycling plants due to the closure of household waste and recycling centres and a reduced collection from customers.

Its WEEE (waste electrical and electronic equipment) recycling facility is now open again but suffering from a depressed market for output materials and increased costs, the retail giant said. “Although we expect there to be some limited recovery, we expect to see volatility in the short term,” the report added.

Mr Roberts continued: “Looking ahead, there is a huge amount of uncertainty but the values and principles that guide our thinking have positioned us well for the opportunities and challenges that are to come.

“Although around 70 per cent of electrical purchases are replacement in nature, a fall in consumer confidence may lead to a delay in the purchase of big-ticket items,” he said, concluding: “We believe this crisis has had a seismic impact on retail and that many shoppers will have been permanently converted to online shopping.”