The Bolton-based electrical e-retailer certainly didn’t have a satisfactory first-quarter performance and the trend has continued. Being very critical of the UK market, the company recently revealed that its losses stretched further last year. The share price of AO World has fallen sharply over the last couple of months, with the company confirming a full-year loss of around £7m up from £6.7m in the previous year. In addition, the company registered an operating loss of close to £12m, which is almost £2m more than the year before.
Most of the losses were linked with its unsuccessful expansion in rest of the Europe, especially in Germany and Netherlands. In this division, the company recorded losses of close to £26.5m, however, the overall revenue soared from £599m to £701m on account of increased sales in the UK particularly. Meanwhile, AO World founder John Robert believes that the market in UK will get more uncertain, as it still faces the challenges of changing trading environment. Steve Caunce who recently replaced John Robert as the CEO of the company, pointed out to factors such as ongoing sluggishness in the housing sector and influence of brexit will dictate the market condition in the UK. After the company dived into the stock exchange at £2.85 a share in February 2014, its share price has shrunk by nearly 50 percent.
Despite such major setbacks, Mr Caunce is confident that the firm’s share would bounce back to its previous valuation or beyond. Looking at the current situation it is unlikely for something of that sort to happen in the medium term. According to online sources, AO World’s will continue to focus on its long-term plans without making any major alterations. In the immediate future, not much can be expected, with the company looking forward to reinvest its UK profits in strengthening its European business.
By not letting its losses hamper its European ambitions, the company has sent a bold message to other market contenders. In the long-term, such investments might prove profitable for the company. By expanding its range, the company has significantly improved its business as well as increased its presence in the region’s market over the years. Online retailing continues to be a lucrative sector and present potential growth opportunity across Europe. Thus, AO World’s recent wobbles may only be a provisional phase that could take a little more time to pass. On a brighter note the company managed to raise £50m in march through a share placing, which is also expected to support its expansions plans in Germany and the nearby countries.