The group, which has a major recycling centre in Telford employing about 200 people, said it planned to shut its Netherlands arm by the end of next March and focus efforts on turning around its German business following a review of the European division.
The move will see it pull out of the Netherlands less than four years after launching in the country.
Half-year results showed European underlying losses widened to £13.6 million from £11.8 million a year earlier after sales fell 3.4 per cent.
But, in the UK, like-for-like sales rose 4.5 per cent, helping underlying interim earnings lift to £7.8 million from £6.9 million.
The European woes saw overall group-wide underlying losses widen to £6.2 million for the six months to September 30, against £5.4 million a year ago.
Statutory pre-tax losses stood at £5.9 million, which marked an improvement on the £10.9 million posted a year earlier.
AO founder and chief executive John Roberts said: "There are encouraging green shoots of profitable growth across our UK business, including within our core major domestic appliances offer and we will continue to invest to drive this further."
On the Netherlands closure, he added: "This will enable us to concentrate on the transformation of our German business, where we have increased confidence in, and visibility of, the three core drivers of the business model that will put us on the path to profitability."
AO World recently overhauled the management team in Europe, parachuting in staff from the UK operations to help turn trading around in the division.
It said the decision to close the Netherlands was likely to cost it around about £2.6 million.