Online electricals retailer AO World (LON:AO.) delivered record FY26 results including forecast-beating adjusted pre-tax profits of £50.5 million.
Reflecting its strong cash generation, the Bolton-based company will return a further £20 million of cash to shareholders through a special dividend and a fresh buyback.
Which begs the question, why did the shares fall in early dealings today?
Well, AO World’s outlook statement was on the cautious side. And the laptops-to-fridges seller has treated investors to a series of profit upgrades of late. So the absence of an upgrade to FY27 guidance also weighed on the stock.
Delivering the goods
Despite weak consumer confidence, the washing machines-to-mobile phones seller attracted 720,000 new customers and won further market share last year.
Revenue sparked up 11.4% to almost £1.27 billion and adjusted pre-tax profits grew 16.1% to £50.5 million. That was marginally above AO World’s previous guidance for profits ‘at the upper-end of £45 million to £50 million’.
In AO we trust
FY2026 was a milestone year for AO World in another way. It became the first retailer globally to exceed 1 million Trustpilot reviews with a 4.9 out of 5 rating.
‘Looking ahead, the external environment remains uncertain,’ warned AO World. The electricals retailer said that ‘ongoing geopolitical volatility and continued inflationary pressures’ are impacting both consumers and input costs across the economy.
Despite this choppy backdrop, management remains confident in delivering the £54.6 million in FY27 taxable profits consensus is calling for.
What did the CEO say?
Founder and CEO John Roberts said: ‘These results represent an incredible team effort with revenue up 11% to £1.27 billion, profit up 16% to a record £50.5 million, and the strongest balance sheet in our history. And all delivered against a backdrop of rising costs.
‘We’ve also become the first retailer in the world to exceed one million Trustpilot reviews at an overall rating of 4.9 out of 5. In a category as demanding as ours, that trust is hard-won and almost impossible to copy. It sits nowhere on our balance sheet, yet it’s among the most valuable things we own.’
Record results confirm AO World continues to reap the benefits of management’s ‘pivot to profit’ strategy. The company generated £66.4 million in free cash flow for FY26 and closed the year with net cash of £16.4 million.
Over the long term, AO World has plenty of scope to increase its major domestic appliances (MDA) market share and take a larger slice of the wider £28 billion electricals market.
In the short term however, there is a risk AO World’s recent earnings upgrade cycle has run its course. The rising cost-of-living is leaving consumers with less disposable income. And AO World faces fierce competition from the likes of Amazon (NASDAQ:AMZN), Currys (LON:CURY) and Marks Electrical (LON:MRK). Given these headwinds, we would sit on the side-lines for the time being.
Read the press release here: https://www.ao-world.com/investor-centre/
