Shares in AO World have crashed 29% after the online domestic appliances retailer surprised the City with a profits warning, admitting that it may have been a victim of flotation hype around the business last year .
At one point this morning shares in the company, which triggered huge demand when it joined the stock market last year, plunged 47% to 154.5p after it sounded the alarm on its full-year performance.
AO said a tough first three months of 2015 for its UK business would weigh on results for the year to 31 March 2015.
John Roberts, the chief executive, said: “AO has experienced tougher than expected trading conditions in the final quarter of the year, as compared to the fourth quarter in the 2014 financial year.
“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.”
AO said in a trading update that UK revenue for the full year was likely to come in at between £470m and £475m, with adjusted earnings of about £16.5m. Previously, the City was expecting revenue in the range of £480m to £487, and earnings in the range of £18.6m to £21.2m.
The retailer, which specialises in kitchen appliances, said that it now realises some of its earlier revenue growth was the result of extra publicity surrounding the company, the impact of which had faded.
AO was listed on the stock exchange last February amid a frenzy over prospects for online retailers. Shares initially soared, prompting some analysts to warn the high valuation was reminiscent of the dotcom bubble. Shortly after the float the stock dipped below its 285p offer price.
Roberts, a former kitchen salesman, made £86m selling 10% of the online white goods company he founded 15 years ago. He retained a stake of 28.6%.
AO said on Wednesday it had also been hit by the loss of a logistics contract, the cost of driver legislation changes, and by the effects of the Black Friday discount day at the end of November last year, when sales were condensed into a shorter time period but did not actually increase them.
“These factors are also expected to impact the performance of the company in the next financial year,” the retailer said. “The board of AO is confident that the company’s fundamental business model remains strong and AO is continuing to deliver on its strategic objectives”.
AO said trading in Germany, a market entered six months ahead of schedule, was doing well and that the company was looking at other new locations for possible international expansion.
