AO World lifts FY profit guidance again

Online electrical retailer AO World upgraded its profit guidance on Tuesday for the second time this year - and the third since November - citing the benefits of its cost-savings drive.

For the year to March 2023, the company now expects adjusted earnings before interest, tax, depreciation and amortisation of £37.5m to £45m, up from guidance of between £30m and £40m given in January.

"Consistent with the themes set out in the trading statement issued on 10 January, we continue to see traction from the initiatives taken by the business to reduce costs and improve margins," the company said.

"Margin improvement initiatives coupled with a continued resilient underlying customer base has driven higher retail gross margins than previously expected and we anticipate that this will continue for the remaining five weeks of the financial year.

"The steps we have taken to simplify the business and become more efficient have outperformed expectations and been delivered quicker than expected."

At its half-year results in November 2022, AO had guided to around the top end of its £20m to £30m range.

At 0955 GMT, the shares were up 17.8% at 66.25p.

Susannah Streeter, head of money and markets at Hargreaves Lansdown, said: "AO World shares have revved up as the company’s cost-cutting drive shows signs of paying off after a turbulent few years.

"The company had capitalised on the accelerated shift to e-commerce during the first stages of the pandemic, and profits soared, but the company came down to earth with a bump, with a sharp reversal of fortunes. Its razor-sharp focus on increasing margins appears to be paying off, and helped by a loyal customer base, returning with repeat custom, AO World is back on the road to a steadier era of growth."