AO World shares surge as profit focus pays off

Electrical retailer's shares jump over 14% as strategic shift boosts outlook.

AO World shares surge as profit focus pays off
AO World

Shares in AO World (LSE: AO) jumped over 14% on Thursday morning after the online electricals retailer upgraded its profit guidance for the full year, buoyed by its shift to prioritising profitability and cash flow.

The FTSE 250-listed firm now anticipates adjusted pre-tax profits to come in "at least" at the top end of its previously stated £28 million to £33 million range for the year ending 31 March. This marks an increase from the guidance issued back in November.

While AO World forecasts full-year revenue of around £1.04 billion - an 8.7% decline from £1.14 billion last year - the company noted its core business returned to revenue growth in the fourth quarter as expected.

Chief Executive John Roberts expressed pleasure at the "clear progress" made after pivoting the firm's focus to "profit and cash generation" during the 2023 financial year. He said the momentum bodes well for achieving the targeted 10-20% revenue growth and 5% adjusted pre-tax profit margin over the medium term.

The online retailer had faced challenges in the post-pandemic period, including profit warnings, sagging consumer confidence and supply issues. It implemented a raft of self-help measures and cost-cutting to steady the ship.

AO World's share price has rallied 62% over the past 12 months as investor confidence returns, with today's surge contributing heavily to those gains. Full-year results are due on 26 June.

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