AO rebound due to ‘emphasis on profitability and generating cash’

The online electricals company has increased its profit guidance for the second time this year as it expects to make an adjusted EBITDA between £37.5m to £45m.

An AO spokesperson said the retailer previously chased growth over several countries and categories but it recently made strategic changes by axing its German business and Tesco partnership.

They told Retail Week: “These things had the potential for growth but the journey to get them profitable was not palatable when we’re putting an emphasis on profitability and generating cash, particularly in an economy like this.

”We’re improving margins and improving costs, and that’s why we’ve ended up here today.”

Amid the cost-of-living crisis, AO says customers are focused on necessities such as appliances as well as must-have products.

“Our core business is in appliances that people take for granted and we’re kind of shielded by the fact they are essential products because people won’t compromise if they need them,” the spokesperson said.

“However, everyone also went wild for air fryers last autumn as the first stock was gone 24 hours later. In November last year, air fryers were the most searched for product on our website.”

By increasing its profit margin again, AO believes it offers customers something different to its competitors.

The spokesperson added: “There’s a lot of choice with electrical retailers; although prices and delivery propositions are roughly the same, if somebody really needs a new product or washing machine instalment and you make that promise of service time and again, they’ll keep coming back.

“Our customer repeat rate is industry-leading and it’s what will get us through the tough times.”