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LONDON (Reuters) - Online domestic appliances retailer AO World made a strong debut on the London Stock Exchange on Wednesday with its shares up 40 percent on its offer price, valuing the business at almost 1.7 billion pounds.

Shares in AO World, one of a raft of British retailers looking to list in London in 2014, were trading at 400 pence at 0941 GMT, above a 285p offer price announced earlier, which had valued the firm at 1.2 billion pounds.

Founder and Chief Executive John Roberts reduced his 38 percent stake in the company to 28.6 percent in the sale, which gave him a payout of around 86 million pounds, the retailer said.

Based on a market valuation of 1.7 billion pounds, his remaining stake would be worth around 486 million.

AO, which competes with Dixons, Britain's No. 1 electricals retailer which sells appliances through its Currys chain and online, plans to expand its product range, including a move into televisions, and will evaluate expansion in Europe, initially in Germany.

The company expects to raise total gross proceeds of 60 million pounds from the share sale.

AO's listing is one of many expected in Britain's retail sector in 2014 on the back of the country's gradually improving economy.

Convenience store McColl's, Poundland and Pets at Home have all announced intentions to float recently, while Fat Face and House of Fraser are also expected to come to market this year.

(Reporting by Neil Maidment; Editing by Jane Merriman)