AO World is getting back on track

The washing machine seller's shares jumped this morning after sales increased.

by Jack Torrance
Last Updated: 21 Jul 2015

Has AO World emerged from its rough patch? The online white goods retailer, which has struggled to meet expectations since its sky-high IPO last year, said today that UK revenues in the three months to June were up 11.2% year-on-year.

That’s welcome news for a business whose shares have continued to be criticised for what critics say is an unreasonably high value. They were up 9.3% this morning to 130.9p; an improvement, but one that doesn’t take AO anywhere near its peak of 330p back in February.

The slide to its current state was sparked off by a profit warning at the end of February. Just weeks later AO chairman Richard Rose sold off 90% of his stake, but today he seemed keen to appear confident in the company's future.

‘The business is on track with its long-term strategic progress,’ he said. 'Our unbeatable prices, huge range and availability, complemented by outstanding service means that our customer satisfaction levels have remained market beating.’ AO’s sales in Germany, which it entered recently, ‘continue to build satisfactorily,’ he added.

As well as pushing its European expansion, AO says its key focus for the year is building brand awareness – a task it has hired trendy ad agency Karmarama to help out with.

So is this the end of AO’s rut or just a blip in its decline? Analysts seem to be fairly upbeat. ‘Overall, while there must remain some downside risk to forecasts given the competitive nature of the market, this update is better than the market appears to have feared and, after a weak run in the shares, we retain our positive stance,’ Numis’s Andrew Wade told City AM.

Don’t expect bumper dividends any time soon though. ‘As the ambitious European expansion is bedded down, little to no organic profit growth is likely for the next three-to-five years,’ CityIndex’s Ken Odeluga told the Telegraph.

Anybody who bought shares at 330p has probably lost hope of ever getting their money back, but today’s figures should provide more recent investors at least some reassurance that they could eventually get their money back – even if they have to wait a while.

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