LONDON (ShareCast) - (Sharecast News) - Online electrical goods retailer AO World reported strong sales growth on Thursday as it continues to benefit from increased online shopping despite the reopening of stores since the easing of coronavirus lockdown measures.
AO said the trading momentum announced at the time of its preliminary results in July has continued and "the significant change in demand" for its products and services has been maintained.

In the four months to the end of July, UK revenue was up 58.9% to £401.3m year-on-year, while German revenue rose 91.5% to €74.3m.

"The demand for AO's products and services has been sustained since competitor stores started to re-open at the beginning of July. This reaffirms our belief that this is a structural shift in demand where customers have found a better way to shop the electricals category," the company said.

"We remain cognisant of the significant level of economic and customer uncertainty driven by both Covid-19 and the prospect of Brexit in December and the impact this may have on demand for electricals in the medium-term."

AO's interim results are due out in November.

At 0945 BST, the shares were up 4.1% at 201.10p.

Russ Mould, investment director at AJ Bell,said: "While encouraging to see rapid revenue growth, profit is what really matters and there is no mention of it in the latest update. In July, full-year results to the end of March showed that the business still wasn't making money. It reported a £3.8m operating loss, albeit narrowed from the previous year's £13m loss.

"This year's share price rally would suggest the market has become more confident about AO's ability to start generating a profit at the group level.

"Its proposition is good: selling a wide range of items online and offering superior levels of customer service. However, this is still a highly competitive market and AO cannot afford to undercut rivals by a large amount.

"Obtaining commission from a partner selling insurance is an important driver of earnings for AO yet this is a sensitive area. Customers may have been happy with the ordering and delivery service but their opinion of the brand, and therefore willingness to buy again, can easily be soured by AO's representatives giving the hard sell on warranties.

"AO faces the hard test later this year if its 2020 sales boom has been a one-off driven by people spending a lot of time at home and wanting to ensure their mod cons are up to scratch. As people return to offices to work and spend less time at home, one has to wonder if sales growth starts to moderate."

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