Consumer spending in the spotlight as AO World gets ready reports results
Archant Norfolk 2018
Electricals retailer AO World will unveil full-year results this week, with the figures expected to reflect tough trading in the UK.
The online group is forecast to see operating losses grow to £3.5 million in the year to March, which compares with a loss of £2.1 million in 2017.
Andrew Wade, analyst at broker Numis, said the numbers would indicate tough trading in the UK, where consumer confidence has plummeted.
“While disappointing to see the tough UK trading conditions impacting full year profits, it really should not come as any surprise – we note that there has been a string of weaker updates recently from home-related retailers – Carpetright, Topps, B&Q, Safestyle, ScS, DFS, Dunelm, Dixons,” he added.
Retailers across the board have been pummelled by rising costs and falling sales as the collapse in the pound following the Brexit vote has fed through, with firms selling big ticket items particularly affected.
Nevertheless, AO World expects to report a 14% increase in full-year sales to £796 million, slightly above the mid-point of market expectations.
The increase will come despite the tough home market and fewer promotions, with revenue buoyed by growth in Europe, which continues to pick up pace.
In the UK, turnover is forecast to increase 8% to £680 million following growth in the fourth quarter.
Mr Wade added: “The European operation is building clear momentum and the medium term targets are increasingly likely to be reached ahead of schedule.
“Despite the tough UK trading conditions, we continue to see a significant long-term growth runway; the shares have had an exceptional recent run, gaining circa 40% over the last few months, but we continue to see an opportunity as AO replicates its UK proposition in Europe.”
Shares in AO World have risen from 111p in January to around 163p today.
The following events are due to take place next week:
Monday, June 4
Construction PMI data released
Tuesday, June 5
Finals: AO World
Services PMI data released
Wednesday, June 6
Trading updates: WH Smith
AGM: GVC Holdings
Thursday, June 7
Finals: Auto Trader, CMC Markets, Mitie
AGMs: AA, Dignity, PageGroup
Friday, June 8
Finals: Fuller Smith & Turner