Ocado shares have fallen by over a quarter in the past month
Directors’ Deals: Ocado board member shows confidence
Ocado shares have fallen by over a quarter in the past month as the online grocery retailer struggles with inflation and cost of living crisis headwinds. Demand is weakening as consumers trade down and spend less, with a first annual decline in grocery sales now expected by the business.
Ocado Retail, the joint venture with Marks and Spencer, said in a third-quarter trading update this month that “we now expect to see a small sales decline” in this financial year. This was despite the number of active customers growing by almost a quarter to 964,000 and average orders per week rising by 11 per cent against last year. The company had previously said in its half-year report released in July that it expected low-single digit revenue growth this year.
The average basket value was down by 16 per cent to £116 in the period, the company said. It warned that “consumers are shopping smaller baskets and seeking value-for-money items as they respond to inflationary pressures” and is forecasting “close to break-even” annual cash profits.
The news for Ocado got worse this week as HSBC analysts downgraded their recommendation on the company’s shares from hold to reduce, sending them plunging further downwards. It feels like there is a mountain to climb for the shares to get back to the heady heights they enjoyed during the pandemic, when they traded at over 2,800p as online shopping boomed.
But independent non-executive director Jörn Rausing seems to be bullish on the long-term outlook for the company. On September 15, £7.4mn-worth of shares were bought by Apple III Limited, a company which is fully owned by a trust of which Rausing is a “discretionary beneficiary” according to the disclosure to the market.
