AO World boss warns over price increases to offset £8m Budget blow
The retailer estimates its wages bill will go up by £4 million due to the rise in NICs and another £4 million because of the minimum wage increase.
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Your support makes all the difference.The boss of online electricals retailer AO World has become the latest to warn over price rises to offset more than £8 million in extra wage costs due to Budget measures.
AO World estimates its wage bill will go up by around £4 million due to the increase in employers’ national insurance contributions (NICs) and about another £4 million with next April’s minimum wage rise.
Founder and chief executive John Roberts told the PA news agency the group is likely to have to raise prices and make savings to mitigate the impact.
He confirmed “some of it will go into prices”, but said it is too early to say by how much and stressed the group will also look to use growth and efficiencies to counter the blow.
“This whole Budget is extremely inflationary for retailers,” he told PA.
“Is anyone naive enough to think that will not follow into pricing?”
“From our point of view, it’s not about cost savings and taking headcount out, it’s about how do we drive efficiencies and how do we grow as a business,” he added.
Car parts-to-bicycle retailer Halfords also flagged on Tuesday that it may need to pass on the Budget cost impact to consumers as it faces a £23 million hit.
AO World said it is also bracing for consumer spending to pull back as retailers are forced to raise prices.
“That’s normally what happens in an inflationary environment but, from our perspective, the majority of what we sell is non-discretionary,” said Mr Roberts.
“If your fridge breaks, you’ll probably buy another one.”
The comments came as the group increased its annual earnings outlook after a strong first half that saw underlying pre-tax profits jump 30% to £17 million on revenues 6% higher at £512 million.
We've had a Morecambe and Wise summer sales period - all the right volumes, just not in the right categories
This came despite challenging weather over the summer, which saw a shift from the normal seasonal demand for fridges and air conditioning units towards tumble dryers.
Mr Roberts said: “We’ve had a Morecambe and Wise summer sales period – all the right volumes, just not in the right categories.
“The wet summer weather meant we sold fewer fridges and air conditioning units and more tumble dryers than we had planned.
“Overall, our team did a fantastic job to play this out as a satisfying score draw.”