In the wake of yesterday’s record breaking FTSE 100 success, ending the day on 6959.63, the stock market has overtaken 1999’s peak and is continuing to rise to new heights.
Athens has secured a four month extension on its recovery plans, with backing from Eurozone finance ministers, while low interest rates have urged customers to keep spending. Both factors have impacted shareholder’s confidence on the stock exchange.
While most companies have been celebrating, AO World’s shareholders have been left with disastrous results. The appliance company’s shares fell by up to 45% this morning, dropping the company’s market value by a staggering £500m in early morning trading. The shares opened 47% lower than Tuesday’s finish at 281p.
Though the company has recovered slightly, recorded at 202p around 9.45am, the news shows a drastic change from the company’s 2014 stock exchange success. Last February AO World soared by a third on its first day of trading, breaking its 284p flotation standard in March, with 380.5p a share.
The company has struggled to maintain its high standards, today releasing a statement that confirmed that its profits for the financial year (ending 31 March) are expected to be lower than market expectations:
“The Company expects growth in revenue and adjusted EBITDA for the UK business for the current quarter to be lower than anticipated. As a consequence, the Company expects the results for the financial year ending 31 March 2015 will fall slightly below market expectations.”
The loss stems from a difficult black Friday, which “did not produce incremental sales but condensed sales into a shorter time period”. This led to revenue growth in the second half of FY14, which is put down to ‘extra publicity’ at that time, rather than a reflection of the business itself. Entering the stock market and attempting global expansion in the same year suggests AO World was trying to bite off more than it could chew, creating the decline witnessed on today’s stock market
The Bolton based company is expected to have topped the FTSE 250 fallers list, leaving broker Jefferies International to comment, ‘No doubt pride dented in the AO management team’.
Though the UK’s leading online retailer is clearly disheartened, it remains optimistic for 2015’s potential. AO World’s CEO, John Roberts stated, “While we are disappointed that sales and profits are going to come in slightly below expectations, we remain committed to our market-leading, customer-focused business model”.