AO World is led by John Roberts
(Picture: AO World press image)AO World is poised to complete a humbling retreat from Europe after years of struggling to crack the continent.
The online white goods retailer today kicked off a “strategic review” of its Germanbusiness, as ongoing issues with costs and competition make its future within AO increasingly unlikely. Third-quarter revenues in Germany sank 24% due to increased local competition, rising marketing costs and supply chain issues.
AO said its board would “evaluate a range of options” for the German arm, with a focus on “maximising shareholder value”.
Jefferies said: “Given the apparently more enduring nature of the issues being faced, the balance of probability would seem to be meaningfully weighted towards closure/sale.”
A spokesperson for AO declined to comment on the range of options being considered.
An exit from Germany would mark the final chapter in AO’s retreat from Europe. It shut its Dutch business in 2019 after just three years of operation. CEO John Roberts said at the time that AO had made “mistakes” in Germany but declared he had “real conviction” that the business could reach sales of £250 million one day.
German sales were £226 million last year, up from £125 million a year earlier. AO first launched in the market in 2014 and European operations have been a more or less consistent drag on operations ever since.
Nick Bubb, an independent retail analyst, said: “AO.com’s much vaunted expansion into Europe seems to have failed.”
Weakness in Germany hit AO’s overall performance. Sales in the three months to 31 December were down 14% on last year, though still 45% higher than pre-Covid levels. Worryingly for investors. the Christmas slump means AO lost momentum as the year went on.
The Bolton-based business said it was still on track to meet full-year forecasts but admitted that driver shortages and supply chain problems continue to be an issue in the UK.
Shares sank 3.4p, or 3.2%, to 103.5p. The stock was as high as 411p in December 2020.
Roberts set up AO in 2000 after a friend bet him £1 in the pub that he wouldn’t follow through on his dream of starting a business.
