Market News

AO World posts £37m loss but shares soar on 2023 profit forecast

Electrical retailer AO World (GB:AO) has posted a £37m loss for the year to March 31, blaming driver shortages and supply chain inefficiencies – but forecasts profit for the fiscal year 2023. 

The London-listed group says it expects adjusted core profits of £20-£30 million in the 2023 financial year. 

Shares rose 15% in early trade in the wake of the news

Shares in AO have lost up to 60% of their value this year, as the company divested itself of its German division and faced difficulties with an insurer cutting credit cover.

Shares of the London-listed group, which have lost nearly 60% of their value so far this year, rose as much as 15% in early trade.

AO World’s challenges

AO’s Founder and Chief Executive, John Roberts, said: “AO was founded on the belief that online is a better way to buy electricals. That belief is as strong as ever, even – and especially – as we go through one of the most challenging operating environments we’ve weathered as a company.

 “The past 12 months has been a turbulent time for business and for retail in particular, and AO hasn’t been immune to those effects. Looking ahead, we certainly have more volatility to navigate, but the core fundamentals of our business remain strong. We entered the new financial year with a period of strategic realignment, and a focus on cash and profit generation.”

The British Retail Consortium said that AO’s rise in sales value “masked a much larger drop in volumes once inflation is accounted for”.

The company deals in domestic appliances and consumer electronics through its websites and third-party websites, and had been a ‘pandemic winner’, but this year has seen the stock plunge 75%.

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Danni Hewson, financial analyst at AJ Bell, said that the rise in AO’s shares may be due to the company offering clarity on the costs of exiting the German market. He said, “The company was also remarkably upbeat, although that may simply be AO putting on a brave face despite a multitude of problems in the background.”

View from the City

According to TipRanks’ analyst rating consensus, AO stock has a Hold rating, based on one Buy and one Sell rating. 

The average price target is 52.5p, which represents a 17.16% upside from the current price level. The stock has a high forecast of 65p and a low forecast of 40p.

Is AO World a good investment?

AO World’s profits have suffered from failed attempts to enter European markets, but the company’s profit predictions today seem to offer hope for the future even in a tough market.

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