LONDON (ShareCast) - (ShareCast News) - Shares in online electrical retailer AO World plunged 6.69% on Tuesday after the company warned of a significant slowdown in UK first quarter growth due to Brexit concerns, a weak pound and a slowdown in the UK housing market.
Full year revenues increased 17% to £701m as its UK and Continental European businesses grew sales, but the company said the "challenging" trading environment seen in the second half of the UK financial year had continued.

Shore Capital said AO has a strong logistics capability with a "slick customer facing web experience" but did not believe this amounts to a "compelling competitive point of difference in the electricals market".

"Progression in Europe is key to investment case of this business and we await to see if execution emerges. Given the current rating and our concerns about the model, we reiterate our 'sell' recommendation," the broker said in a note to clients.

Group adjusted losses before interest, tax, depreciation and amortisation were cut 46.2% to £2.1m, while the group's operating loss increased to £12m from £10.6m reflecting further trading losses incurred in Germany and the Netherlands

"In the second half of the year, trading in the UK became more challenging as we began to feel the impacts of dampening consumer confidence following the UK's vote to leave the EU, subsequent price inflation and a slow-down in the UK housing market," AO said.

ETX Capital said AO was "growing sales impressively but finding it hard to turn a profit".

"European expansion is costing money. It may also not be able to rely on the UK to prop up the business as consumer spending is showing signs of flagging, while inflation rises faster than wages," ETX said.

"White goods are a necessity. But given the products, delivery schedules and warranties are virtually the same as rivals it's hard to differentiate on anything other than price. And when price is the only reason to go with a company, said firm is going to find it tough to improve margins."

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