AO World has said inflationary pressures are easing, as the UK online electrical goods company bounced back to profitability after a big restructure, including “significant” job cuts.
The founder and chief executive of the company, which sells kitchen appliances, mobile phones, TVs and laptops for home delivery, said inflationary pressures had “levelled out” over the last year.
“Over the last 12 months we have seen inflationary pressures reducing dramatically and very much levelled out as things like shipping prices have returned to more normal levels and supply chains have returned to a more normal situation,” John Roberts told BBC Radio 4’s Today programme. “From our point of view, the internet is about as price transparent as it gets.”
His comments mirror those made on Tuesday by Simon Roberts, the chief executive of Sainsbury’s, who said soaring food inflation was starting to fall – to 18.3% in May from 19% in April – although it is still at the highest levels seen in decades.
AO World reported pre-tax profits of £8m in the year to the end of March, up from an £11m loss in its previous financial year, as revenues at the troubled Bolton-based retailer fell 17% to £1.14bn.
During the year the company – last month Mike Ashley’s Frasers Group took an 18.9% stake, making it the biggest shareholder – shut its German operation and cut back on the product lines offered for sale to focus on returning to profitability.
A restructure at the business included ending the trial of a “store-in-store” format in Tesco and shutting down its business focusing on the housebuilding sector.
The company, which said it was forced to introduce delivery charges for all online orders to cover rising costs, said the job cuts had particularly focused on senior and middle management roles.
“We have completed a major staffing restructure, which has seen a significant reduction in headcount and subsequent saving in the cost of senior and middle management layers,” it said. “A detailed review of our office footprint was completed in the year, which has seen the business close three offices across the group.”
The retailer said that its cost-saving actions, which included reducing its stock holdings and rationalising vehicles used across the business, would offset inflationary pressure in its business this year, keeping its £226m cost base flat.
“AO World is showing signs that its decisive recent actions are beginning to take hold,” said Richard Hunter, the head of markets at Interactive Investor. “AO World is showing signs that its decisive recent actions are beginning to take hold.”
