Ocado sales increase but jury still out

ONLINE grocer Ocado yesterday reported a 27 per cent sales rise in the four weeks to Christmas – but some analysts still questioned the company’s progress following a troubled float.

The firm posted gross sales of £50.9m for the period, helped by more customers shopping online instead of going to supermarkets in freezing weather conditions.

Ocado was forced to slash the price for its initial public offering (IPO) in July to 180p – down from initial hopes of 200p and 275p – after retail analysts and fund managers claimed the business had been overvalued.

The share price hit a low of 120p in October before bouncing back to 184p. It closed at 181p yesterday.

Chief executive Tim Steiner said yesterday: “We are delighted to see the continued growth in demand for Ocado. A record number of customers shopped with us in this period.”

In a statement the company added “Ocado has done exactly what it said it would do at the time of the flotation” and added that the group was in line with market expectations for full-year earnings.

Ocado, which sells Waitrose groceries through its website, is due to report preliminary full year results on 1 February.

ANALYST VIEWS: IS OCADO ON TRACK TO DELIVER FOR INVESTORS?

CLIVE BLACK | SHORE CAPITAL
We had felt that Ocado may have had a stronger order flow through the inclement weather, albeit with some disruption costs. The overall Ocado performance is broadly in-line with our expectations but the investment case does not change in our minds. Sell.

PHILIP DORGAN | ALTIUM SECURITIES
The trouble is that Ocado has no earnings, or cash generation and its asset value post equity raise is just 30p per share. Also, it is definitely not Facebook. We believe that this is a fair starting point for valuation. We are therefore maintaining our Sell recommendation.

NICK BUBB | ARDEN
The sales figures today will be picked over by the bears, but they look pretty good to us, albeit the final results are not far away now (on 1 February). That is probably a more important share price catalyst.