Online retailer AO World slumps on cut to earnings outlook

By Kate Holton LONDON (Reuters) - AO World , the British online retailer of domestic appliances that soared at its flotation a year ago, cut its full-year earnings outlook on Wednesday and saw its shares crash by 46 percent at the open. AO, which has also moved into Germany as part of a wider European expansion plan, said some of the revenue growth this time last year was due to the extra publicity around its flotation, making it harder to live up to the original outlook. The group, which on Tuesday was valued at six times the level of its peers on a forward price to earnings measure, said the fourth-quarter slowdown meant the results for the financial year ending March 31 would fall slightly below market expectations. "When you look back with 20:20 hindsight, maybe we should have factored that in, but in a fast-growth business it's not always easy to see exactly what is contributing what," Chief Executive John Roberts said. "So we continue to learn but the big picture of the business is completely unchanged." AO, which sells everything from washing machines and fridges to ovens and vacuum cleaners, floated in February 2014, rocketing on its first day to 40 percent above its offer price. Its shares subsequently fell by 31 percent from that level. AO said it now expected revenue for the UK operations of around 470 million pounds ($728 million) to 475 million pounds, about 2 percent lower than expected. A forecast of adjusted core earnings of around 16.5 million pounds compares with an earlier forecast of 18.6 million pounds. However analysts said the trading update would knock the confidence of investors who thought they were buying into a business with solid earnings. "No doubt pride dented in the AO management team," analysts at Jefferies said. "And whilst a miss is a miss, investors looking for a near-term EBITDA result are in the wrong stock, one suspects. "And though revenue guidance has been missed and confidence in management's ability to guide undermined, a 2 percent revenue downgrade is perhaps not a sign of terminal ill-health." ($1 = 0.6455 pounds) (Reporting by Kate Holton; Editing by James Davey and Tom Heneghan)