Shares in online retailer AO World crash as it warns of profit cut

Shares in AO World collapsed 15 percent on Wednesday as the electronics retailer issued a profit warning for 2017 and reported an increase in the number of suppliers pulling out of its deals amid intense market competition.

After falling about 30 percent to 13.1 pence on Tuesday, AO World’s shares tumbled another 15 percent on Wednesday morning to 11.4 pence, valuing the company at just over 400 million pounds ($554 million). Trading volumes were almost nine times its three-month daily average.

“We’ve seen an increase in the number of large retailers withdrawing from our retail partnerships,” Chairman Stephen Howard-Sarin said on Tuesday.

“This is naturally putting pressure on our sales and profitability as well as having a distorting impact on our investment plans. We need to remain proactive and agile as we ensure the quality of our customer service is maintained.”

Commerzbank analysts, who have a “hold” rating on the stock, wrote on Wednesday that there was still an ability to reach 2016 earnings targets but the near-term outlook was for “short term distraction.”

AO World operates 47 stores in the U.K. and Ireland and offers an assortment of electrical goods across its website and, it says, over 1,000 stores across Europe, as well as 74 shops in the United States.

The company has suffered from increasing competition, with online retailers such as Amazon and challenging the traditional trade.

AO World reported annual profit in line with analyst expectations for 1.9 million pounds, down from 12.6 million pounds in 2015.

AO World said it would have invested 6.5 million pounds in customer service and tech in 2016-17, up from 4.7 million pounds in 2015-16. It had offered 53,000 hours of customer service and 872,000 product returns and exchanges last year.

It also planned to invest 2.1 million pounds on its e-commerce sales next year, up from 1.8 million pounds in 2016-17.

Leave a Comment