Bottom Line: AO could be the next online retail success
WHITE goods retailer AO.com has done little to dissuade comparisons with Asos, the phenomenally successful online fashion retailer that floated 13 years ago – when it announced listing plans earlier this month it even named former Asos chairman Brian McBride (also an ex-Amazon UK managing director) to its board.
Yesterday’s 32 per cent rise in shares puts it off to a decent start, giving the company a market cap around the same as home shopping giant N Brown, and more than Argos owner Home Retail Group (HRG).
Its price-to-earning ratios certainly puts it alongside its idol in the online retail world. While HRG and N Brown trade at around 20-21 times earnings, AO – which made just £10.7m in underlying earnings last year – is currently priced at a huge 150 times earnings, higher even than Asos’ multiples (around 95 times).
It’s no wonder the rapid rise in price has got some analysts spooked – particularly those that remember the spectres of Boo.com and Pets.com, the late-1990s e-commerce collapses that became two of the dotcom era’s most high-profile cautionary tales.
Founder John Roberts now needs to prove to investors that his white goods outfitter is not just another flash in the pan. First on his list must be the promised international expansion – using yesterday’s proceeds to take the AO.com brand over the channel and change how the Germans buy their freezers too.
If that works, there’s no reason AO shouldn’t be another huge British online retail success. But it’s a big if.