A chill wind blew for Ocado this week after the Beast from the East dented first quarter sales.
The wintery storms that caused widespread disruption in the final days of February reduced the online grocer’s first quarter sales growth by almost one percentage point.
This meant retail revenue growth was a more modest 11.7% to £363.4m, compared with 13.1% in the same period in 2017 and consensus estimates of 12%. Average order size fell 0.4% to £110.45 compared with £110.85 in the 13 weeks to 26 February 2017, though average orders per week rose 11.1% to 280,00 from 252,000 in the 13 weeks to 26 February 2017.
The slowing sales growth led to a frosty City reception. The shares fell 0.7% to 568.2p on Tuesday following its trading update after dropping 2.3% on the previous day. By Thursday lunchtime Ocado was down to 532.8p, 9.1% lower than the previous week’s closing price of 585.8p.
Broker Numis reduced its rating on the stock from ‘buy’ to ‘add’, but argued the first quarter update remained “solid” despite the consensus miss. Instead, the rating cut reflects Ocado’s rapid share price growth driven by the signings of international supply deals with France’s Groupe Casino and Canada’s Sobeys. The grocer’s shares have more than doubled since late November and hit a multi-year high of 603.2p in early March.
Hargreaves Lansdown said: “We’re unlikely to get news of any more deals at this stage … any indication there are more interested parties at the negotiating table will be important.”
Potato producer Produce Investments bounced into the black in the first six months of its financial year, turning last year’s £1m loss into a £2.1m pre-tax profit on revenue up 1.6% from £79.3m to £80.6m. Shore Capital stated: “The results highlight a significant improvement in profitability driven by a combination of strong volume growth aided by new business wins, lower raw material prices and good cost control.” The shares remained unchanged at 162.5p on Thursday.