Ocado shares fall after dim sales forecast
Ocado Group (OCDO.L) shares fell in early Tuesday trading after the retailer forecasted a decline in earnings from its joint venture with Marks & Spencer (MKS.L) as consumer spending contracts.
The company that calls itself “the world’s largest dedicated online grocery retailer” said that it expects earnings to fall and customers’ basket sizes to shrink in the first half of 2023.
The fourth quarter revenue for the online grocery retailer grew by 0.3%, below the predicted mid-single digit growth.
Ocado shares dropped more than 10% to 722p early Tuesday trade, down 86p over the past 24 hours.
On average, customers ordered 8.3% less items per order than they did a year ago. This shows that shoppers are returning to their pre-purchased products.pandemic Visits to physical stores are a common habit.
Ocado said that a better second half “is expected to underpin a strong recovery in 2024” and it expects sales and margins “will recover strongly” in the medium term.
Richard Hunter, Interactive Investor’s head of markets, stated that revenues climbed just 0.3% in the third quarter, while average orders per week rose by 1.9%.
“Active customers also increased by 12.9% year-on-year to 940,000. However, this is a slight decrease from the 946,000 reported in the third quarter update.
“However, the average size of the basket declined by 1.3% and prices rose. Ocado however points out that although the cost inflation passed onto the customer was the least among its competitors, the number of items purchased declined.
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“The group is yet to make a sustained profit and the competition in the retail sector is likely to continue.
“Meanwhile frustration has been evident for the Solutions group to make meaningful contributions, even though a steady direction is being established with additional partnerships.
“In the meantime, the stock may have become the perennial “jam tomorrow” play and the volatility of the share price shows widely differing reactions to prospects.”