The blockbuster Black Friday sales event may be on the horizon this week (23 Nov) but AO World (AO.) remains down in the dumps with UK consumers buying fewer appliances.
AO specialises in so-called ‘major domestic appliances’ or MDAs like fridges and washing machines, even if it added to its offering through the purchase of mobile phone seller Mobile Phones Direct earlier this month.
Its shares fall 6% to 116.8p, paring earlier heavier losses, as investors react to a reported first half loss with revenue growth of 9.9% and just 5.7% in the UK where AO says the MDA market is ‘tougher than expected’. This likely reflects consumer caution amid the uncertainty created by Brexit.
UK PROFITABLE BUT LOSSES OVERSEAS
As ever with AO its UK operations are profitable but investment in overseas expansion is what tips the company into a loss. The company hopes its European business will make a profit by 2021, although it remains to be seen if investors will retain their patience that long.
Shore Capital analysts Greg Lawless and Clive Black are ‘encouraged’ that there is no change to full year guidance but note a greater weighting to the second half than previously indicated and add that the risks ‘remain on the downside’.
Their counterpart at Numis Andrew Wade is more positive. ‘While the challenging backdrop suggests few short term share price catalysts, we retain confidence in AO’s model, believing that its standout customer proposition, commitment to service, and development of competency-based income streams, will deliver long term value,’ he says.
