AO World share price falls as investors focus on economic storm clouds on horizon despite increase in revenue

 
Jasper Jolly
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Demand For Consumer Appliances Strong Despite Weak Global Economies
AO World saw online revenues increase by over 10 per cent (Source: Getty)

AO World has reported increased sales in the UK as its European revenue grew strongly, but shares fell sharply as it warned of bumpy economic conditions to come.

The figures

UK ao.com revenues grew by 10.3 per cent year on year. Overall UK revenue increased by a slightly smaller 8.9 per cent, reflecting legacy logistics and website operations for third-party brands.

European revenue increased by 28.4 per cent year on year, after a "period of focus" on logistics and capacity.

Overall group revenue was up 12.3 per cent year on year in the quarter, the company in line to hit previous revenue guidance of 700.3m to £735.9m for the group. Previous earnings guidance predicted £2.4m losses to £4.7m for the full year.

Shares fell by more than eight per cent in morning trading.

Why it's interesting

Online shops continue to eat the retail world, but there is still much room for growth. AO World's revenues have increased steadily but investment in distribution has held back the group's profits. The company will hope the investment pays off as consumers start to feel the Brexit squeeze.

With inflation set to come in hard in 2017 economists are warning that consumer spending – which held up impressively following the UK's vote to leave the European Union – is set to fall sharply. If these predictions come true it is difficult to see how retailers can avoid taking a hit too.

AO World's focus on white goods may make it particularly vulnerable, as UK households put off making major purchases of durable products until their prospects improve.

What AO World said

John Roberts, CEO, said:

AO continues to make progress on its long term plan; delivering sales growth across all categories and territories.

"We performed well over our peak period, particularly through Black Friday," he added.

Roberts also warned it is "mindful of the uncertain economic outlook" in the year to come.

In short

Increased revenues are an encouraging sign for AO World, but the warnings of tough times ahead could worry some investors.

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