Ocado’s good run on the stock market came to an abrupt end this week. Lower margins and an admission of “disruption” around the jubilee and “uncertainty” over the Olympics sent the retailer’s share price plunging 17% on Tuesday to 85p, their lowest point since January - although the high proportion of Ocado shares on loan to short sellers exaggerates the impact of good and bad news on the share price.
The online grocer revealed its EBITDA margin had dropped to 4.8% in the half-year to 13 May from 5.2% in the same period last year. It blamed increased vouchering and higher distribution costs for the weaker performance.
The performance was interpreted by analysts as anything from “a bump in the road” to “poor results with a far from compelling outlook statement”. Several also pointed out that rivals were growing online sales faster than Ocado, prompting an angry response from CEO Tim Steiner, who claimed Sainsbury’s was cannibalising its bricks-and-mortar sales and Waitrose was still a “minor operator” online.
Ocado also confirmed that Duncan Tatton-Brown would be joining as CFO from Fitness First. Earlier in the week, Morrisons revealed its long-standing group finance director Richard Pennycook would be leaving next year.
Analysts said Morrisons would miss his “steady hand” and investors appeared to agree. On Monday, the announcement prompted a 2% drop in the company share price to 264p.
There was more upbeat news for suppliers this week. Greencore’s shares opened 2% higher after it agreed to buy US sandwich and sushi maker Schau for $17m (£10.9m) and announced a $50m supply deal with 7-Eleven in the States, months after buying one of its suppliers, Marketfare.
“Very quickly the loss-making US operation has been transformed into a business which can now securely stand on its own,” said Investec.
Fellow Irish company C&C Group had a more mixed week. Its share price opened up 2% to €3.25 on Wednesday after it predicted full-year operating profits of €112-€118m and said it expected volumes to improve. But after blaming the wet weather for a 25% fall in value sales of Magners and Gaymers in the quarter to 31 May, it will be praying for warmer weather.