Credit: AO

Can AO World silence its critics?

The white goods retailer's shares dived 47% this morning after a profit warning.

by Jack Torrance
Last Updated: 21 Jul 2015

It's been a turbulent end to AO World's first year on the stock market. The white goods retailer's fortunes were looking remarkably good in its third quarter update at the start of January, when it said sales were up 38% thanks in part to a big boost on Black Friday. But today things were a bit more troublesome.

Its shares plunged as much as 47% this morning after it announced it expects sales and profits growth to come in below expectations. It looks like the company experienced a touch of euphoria, as it admitted it benefited from the publicity surrounding its IPO which boosted sales this time last year - making this year's targets harder to meet.

It now expects UK full-year sales to be between £470m and £475m (down from £480m- £487m) and profits, or 'adjusted EBITDA', of around £16.5m - down from expecations of £18.6m-£21.2m. There's no sign of a planned change of direction for the fridge-seller, though.

'While we are disappointed that sales and profits are going to come in slightly below expectations, we remain committed to our market-leading, customer-focused business model,' said AO's CEO and founder John Roberts. 'We continue to redefine retailing in our chosen categories with unbeatable prices, huge range and availability, complemented by amazing service.'

The near-half drop in AO's market cap does seem a touch drastic and by the time of writing its shares had regained some of their value and were down 29% to 199.4p. Panicky investors were likely harking back to the time of the company's float, when its eye-popping valuation of 175 times earnings led to talk of a new dot-com bubble. Today's collapse in the share price does give some credence to those who thought AO was seriously overvalued.

On the plus side, the company said its German expansion is ahead of schedule and it was looking for other markets to enter in the future. Roberts will be hoping that international success and the growth of its TV and audio sales will mean AO's critics all come out in the wash.

Tags:
Retail

Find this article useful?

Get more great articles like this in your inbox every lunchtime