The leading British online electricals retailer, AO World, has reined back its overseas expansion ambitions by closing its operation in the Netherlands after four years at a cost of 3 million euros. Its Dutch base loses around six million euros every year.
John Roberts founded AO World, originally called Appliances Online, almost 20 years ago. It went public 15 years later with a market valuation of £1.2 billion and at the time said its vision was to become the largest online retailer of electrical goods.
However, it doesn’t seem to be able to replicate its success in the UK marketplace with losses in its Dutch operation and its German operations also needing to improve. If this were to close it would be at a cost of £20 million.
Despite a continuing robust British performance, European profit warnings and losses have reduced its market valuation to just £310 million. And that’s because the large investors perceived the company burning cash by its expansion into Europe.
John Roberts still owns almost a quarter of the company’s shares and has returned to the Chief Executive role after handing it over two years ago. Under his leadership AO World has bought a mobile phone business and has started to sell kettles and televisions to broaden its product range. The company has also agreed deals to deliver its goods to Aldi customers.
Losses halved from £10.9 to £5.9 million in the six months to the end of September. John Roberts has stated that his turnaround strategy for the German business is based on stripping out discounting to protect margins and reducing selling prices. AO World shares rose by 15.8% on the back of exiting from the Netherlands and continuing strength in the British operation.