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from The Telegraph:


Sell AO World as shares slump on losses
The online retailer is barely making any profits despite soaring sales, says Questor

AO World [LON:AO], the online white goods retailer, slumped to a loss in the first-half sending the shares down by 15pc yesterday.
The concept of internet retailing is a nice idea. With no bricks and mortar and a low cost website the prices that can be offered beat many shop-based alternatives. Consumers should flock to the service in droves and once a dominant market position has been built up then prices can recover and the company can generate huge profits from its revenue base.
The theory is nice, but AO World is proving that the reality is somewhat different. Revenue is following the script, up 22pc to £264m in the six months to the end of September, but not much else. The company slumped to a first-half pre-tax loss of £8m, as it said the cost of expanding into Germany is proving painful

There are also worrying issues in the more mature UK business where operating profits slumped 60pc to £1.3m, on revenue of £249m, or a profit margin of half a percent.
Questor is not the only one to question the logic of this company. The shares more than halved in value this year and anyone who got involved when shares peaked at 412p on their first days trading in February last year is now nursing painful capital losses.
On top of that. there are a number of reasons why the shares could continue to fall.
Consensus forecasts estimate an adjusted pre-tax loss of £4.3m, from £596m in revenue for the year ended March. The company would need a remarkable reversal of fortunes during the crucial Christmas period to achieve those numbers.
The company is growing very fast, and profits could eventually begin to follow the sales, and rise.
However, Questor is concerned that it may take a long time to reach the profit tipping point and cash could get tight long before then. The company had net cash of £29.6m at the end of September, down from £44m at the same time last year.
We highlighted AO’s bubble valuation in April last year, and advised selling this time last year (217.3p, November 26) and that position remains. Questor would stay well away from the shares in this internet retailer as profits prove hard to come by. Sell.

The Independent:

AO World continues to prioritise growth over profits

Investors’ patience with AO World is wearing thin as the online white goods retailer continues to prioritise growth over profits. AO plunged 23p to 140p as it swung to a first-half loss of £8m from a slight profit last year after heavy investment in marketing in the UK and Germany.

Revenues rose 22 per cent to £264.3m, but news that it is launching in the Netherlands in the spring sparked concerns that the company will remain loss-making for some time yet.

Start-ups breaking untrodden ground typically put growth ahead of profits – think Twitter for example – but 15-year-old AO World is trying to crack a market with plenty of established players able to replicate the online model.

The shares have slumped since the controversial float in February last year that valued it at £1.2bn, prompting its broker Jefferies to later admit the price was “punchy”.

History repeating..

I am old enough to remember another high-flying seller of appliances -

John Bloom

AO World listed 50 years after shares in John Bloom's appliance company collapsed into liquidation.

No connection, and no direct comparison. Just an interesting memory, of someone who revolutionised the marketing of appliances.

Black Friday (tomorrow)

"Online retailer AO World is offering up to £100 off washing machines, with prices starting from £179; more than 25 per cent off American fridge freezers, starting from £399, and up to 70 per cent off vacuum cleaners (from £49) and small appliances, including microwaves from £59." (city-am)


That should briefly help turnover - and increase losses.

Trading Statement

AO World plc ("the Company" or "AO"), the UK's leading online retailer of major domestic appliances, today gives a pre-close trading update for its full financial year; the twelve months to 31 March 2016.

Our UK business performed strongly during the fourth quarter with revenue and EBITDA ahead of our expectations as we continued to gain market share. As a result, we expect full year UK revenue growth to be c.18.5% with revenue growth from AO.com to be c. 27% and UK adjusted EBITDA to be c. £17m. Expectations for the UK business in the next financial year remain unchanged.

In Europe we started trading in the Netherlands on 1st March, leveraging our German infrastructure. We expect revenue in our European segment to be within the current range of expectations. Our European adjusted EBITDA for the full year will be slightly better than expected due to our focus on driving efficiencies. We expect such focus to continue until we move in to our new regional distribution centre in Bergheim later in the year, when we will look to accelerate volume growth.

Our next update to the market will be our preliminary statement on 8 June 2016.

Numis Buy 180.45 250.00 250.00 Retains

Jefferies International Buy 180.45 192.00 192.00 Reiterates

AO World rocks to profits beat

So losses at AO widen yet again.

I have my doubts that you can make a profit in electricals with an internet only operation.

For all the internets popularity profits often come from physical stores where despite higher costs you have more opportunity to sell customers more and in particular profitable add ons it also gives you a valuable edge as people can actually see/use before they buy.Without this you are really just competing on price and there are plenty on the net happy to sell at virtually no profit or at a loss.

The one positive is that if the valuation dropped enough it may become attractive to an existing (profitable) retailer where with integration they may be able to make it profitable.

imo

AO World revenues up


Online electrical retailer AO World's UK business continued to grow with ao.com revenue up by 10.3% year on year and overall UK revenue up by 8.9%, against tough comparatives.

The group said that in Europe revenue for the period was up 28.4% year on year, on a constant currency basis, reflecting a period of focus on building its logistics capabilities, capacity and a solid base for the business.

Overall group revenue was up 12.3% for the quarter, year on year.

The group expects the performance for the full year to fall within the guidance previously given but remains cautious about the final quarter given the uncertain UK economic outlook, currency impacts on supplier pricing and the possible effect on consumer demand.

Chief executive John Roberts said: "AO continues to make progress on its long term plan; delivering sales growth across all categories and territories, and convincing more customers to experience the AO Way.

"We performed well over our peak period, particularly through Black Friday, with the sheer dedication of our teams enabling us to deliver to our customers as promised.

"We also delivered strategic progress during the quarter. We launched computing in the UK, and audio-visual in Germany, retailing both these categories the AO Way - offering a simply better customer experience, executed brilliantly by a brand and team that customers and suppliers trust. Early trading in computing has been encouraging and sales are building as we invest in attracting traffic to the category on ao.com, while both our businesses in Europe continue to gain traction and delight customers.

"Looking ahead we have three months left of the current financial year and are mindful of the uncertain economic outlook. However, we remain confident that our market leading proposition will continue to drive customers to experience the AO Way and enter the New Year excited by the opportunities ahead."

from a consumer's point of view, i believe AO is seen as pretty good all round - never used them myself
however, there have long been rumours that the company is not in very strong financial health

personally, i see no merit in buying the shares

I think their after care protection/insurance makes the money. White goods are bulky and profit wise hmmmm.

Take your pick :-

12 Jan Numis Buy 169.70 250.00 250.00 Retains

12 Jan Shore Capital Hold 169.70 - - Retains

12 Jan Panmure Gordon Sell 169.70 123.00 123.00 Reiterates