Black Friday boosts AO Q3 results

Online electrical retailer AO saw revenue growth in the third quarter after operating losses in its half-year results.

According to its latest trading update, overall UK revenue increased by 11.4% in the three months to December 31, with revenue increasing by 11.2% year on year.

Revenue in the European business was up by 58.4% year on year, while overall group revenue grew by 16.6% for the quarter. No figures were revealed for profits.

Chief executive Steve Caunce (pictured) said: “We have performed well over our peak period, delivering further sales growth across all our territories and are on track with our long-term strategy.

“We are particularly pleased with the double-digit sales growth in our UK business, which has been achieved against a fiercely competitive environment and normalised marketing expenditure. Our customers in the UK benefited from our Black Friday deals this year over a two-week period, enabling us to manage demand more effectively and deliver an even better experience for customers. We are encouraged by the sales growth in our newer categories and we have continued to deliver excellent customer service throughout the period across the business.

“Our Europe operations are progressing in line with our plans and we are pleased with the strong growth achieved, given the limited above the line marketing expenditure. Our brand is attracting both new and repeat customers in mainland Europe and customer satisfaction remains high.

“Looking ahead, although we need to be mindful of the uncertain economic outlook – particularly in the UK – as long as we are relentless in our focus on making things easy for our customers, we can be confident that they will continue to choose the AO way.”

Eleanor Parr
Eleanor Parr

GlobalData retail analyst Eleanor Parr commented: “AO recorded another set of stellar UK results over its third quarter, citing a longer Black Friday discounting period and strong growth in new categories. Like competitors, Dixons Carphone and Argos, offered Black Friday deals over a two-week period this year, rather than limiting offers to the Black Friday weekend. Logistically, this was a wise move, as spreading demand has enabled it to better manage the influx in sales that the promotional period brought. Moreover, in a highly discount-driven sector AO’s Black Friday promotions have clearly been well received by customers this year, with UK total revenue growth up 11.4% versus 8.9% in 2016. However, this extended promotional activity will undoubtedly weaken the already challenging margins the electrical retailer operates in.

“AO has not announced profits in this trading update, however with operating losses widening to £10 million over H1 FY 2017/18 from £1.1m the previous year, we expect this quarter to be equally challenging in terms of profitability.

“AO’s UK operation also benefited from incremental sales from newly-introduced categories, including SIM-free mobile phones, gaming consoles and smart-home products. Diversifying its range away from major domestic appliances and offering smaller, lower-value items will, to some extent, protect AO from falling consumer confidence, which has driven spend away from big-ticket items.”

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