Ocado sales surge but investors wary

ONLINE retailer Ocado yesterday said its sales had surged by almost 30 per cent – but investors remained unconvinced and the announcement was greeted with a dip in its share price.

The company, which recently completed a controversial flotation, hasn’t made an annual operating profit since it launched ten years ago, but hopes to go into the black next year.

Ocado said gross sales in the 12 weeks to 8 August rose 29.5 per cent to £126.5m from £97.7m in the same period last year, supported by higher take-up of its pre-ordered fish and meat “service counter” offer.

Ocado, which mainly sells Waitrose products, began listing its shares in July, but a lack of interest among investors forced the company to cut the asking price for the float to 180p from an initial figure of 200p-275p. It has been trading below that since the float.

Its shares yesterday closed seven per cent lower at 146p valuing the company at around £825m.

Chief executive Tim Steiner said he was “disappointed” for shareholders that the price was not higher but that the company was looking to the medium to long term to reap the rewards of hard work done now. “We are delighted with the (sales) performance. We hope that 2011 will be the year when people can stop calling us the loss-making online retailer”.

Average order size during the quarter was £113.59, marginally down on the £114.73 recorded a year earlier.

Ocado said gross profit margins were stable while earnings were rising in line with trend in the first half.

“The group has to engage in material capital investment to sustain its sales growth and has yet to demonstrate profitability on an already considerable sales base, we continue to harbour reservations about the valuation of Ocado,” said Shore Capital analyst Clive Black.