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AO World sees shares tumble as the online electricals seller warns of 'challenging backdrop' in the UK and Germany

Daily Mail logo Daily Mail 20/11/2018 Emily Hardy For This Is Money

© PA Images Shares in AO World sunk by more than 12 per cent in early trading today as weary investors shuddered at the cautious tone struck by the electricals firm.

In an otherwise robust set of half-year results, in which it said losses narrowed and sales jumped 10 per cent, the online retailer admitted that it had been plagued by a 'challenging backdrop' in its core markets.

AO - founded by executive chairman John Roberts in 2000 and best known for its catchy 'AO, let's go' jingle - specialises in white goods, such as fridges and washing machines, as well as laptops and small kitchen appliances. 

Today, the business warned that the UK domestic appliances market became 'tougher than expected' during the period. As a result, it is now more reliant on its performance in the second half of the year, which includes Black Friday and Christmas.

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Boss Steve Caunce said: 'While our core UK and Germany major domestic appliances markets have been challenging, with the UK major domestic appliances market becoming tougher than expected, we take encouragement that we are at least maintaining market share in this core category in the UK and growing significantly in Germany.

'We expect full year results to fall within the range of board expectations, albeit more second half weighted than previously anticipated.'

a man wearing a green shirt © Provided by Associated Newspapers Limited

This, according to City Index senior market analyst Fiona Cincotta, 'essentially amounts to yet another downgrade that will wear on already-thin investor patience'.

 'AO World still has lots of work to do convincing the market that its investment spending in Europe will add up too much.

'Operational hiccups won't help its case. Perhaps if Brexit is sorted out smoothly and wages rise more consistently, demand for big-ticket items like fridges and washing machines will improve,' she said.  

Markets.com analyst Neil Wilson added that today's numbers are more of the 'same story' with decent numbers in the UK being wiped out by investment in European expansion. 

a man holding a sign in front of a truck: AO World, founded in the UK, launched its German distribution centre in October 2014 © Provided by Associated Newspapers Limited AO World, founded in the UK, launched its German distribution centre in October 2014

AO's half-year operating losses narrowed to £11.7million, down from £12million in the same period last year. 

In the UK, total sales jumped by 5.7 per cent to £334.8million, boosted by new categories such as audio visual and computing. Sales at its newer European business surged 35 per cent to £69.8million.

AO World shares have slumped 40 per cent in the last six months to around the 116 pence per share mark - a far cry from its 285 pence float price.  

Watch: "Jeremy Corbyn: Brexit can be 'catalyst' for UK economy" (Evening Standard)

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