Internet retailer AO World (AO.) should benefit from increased consumer spending in the UK according to Trevor Green, head of institutional equities at Aviva Investors. The company mainly sells major domestic appliances (white goods) such as washing machines, cookers and fridges, but has also moved into small domestic appliances and TV.
"We are further reassured by AO World's recent third-quarter trading update, showing strong momentum in the UK and continued progress on both new product and geographic launches," says Mr Green. "The management team have successfully executed on their commitments made at the time of the float (in 2014) and we remain confident about the scalability of the model.
"One of the key things in this area is trust and about 95 per cent of the company's existing customers say they trust the AO brand. Over 'black Friday' (28 November) when many retailers had offers, and Christmas and New Year, its website was resilient and didn't crash.
"One of the big investment themes this year is consumer spending in the UK, and the picture for this is set fair if you exclude possible disruption around the general election. AO World should be a beneficiary of increased consumer spending: it is an internet retailing specialist and figures for this are only trending one way - up.
"The company has also recently moved into Germany, where it launched operations on 1 October, so its European expansion plans are six months ahead of schedule. It has an interesting angle of growth to come through in Europe.
"Third-quarter website revenue was up 38 per cent, and total revenue (including third-party retail and logistics) was up 26 per cent. We expect revenue of about £500m for 2015, and that this should rise to nearly £1bn in 2017 – real growth."
Aviva holds about 3 per cent of AO World's shares across its funds after investing at the initial public offering. AO World is listed on the London Stock exchange and trades at 270p a share as at 21 January 2015.
