Ocado tumbles after sales slowdown

Steve Dinneen
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OCADO led the FTSE 250 fallers yesterday, with its shares dropping over nine per cent after it admitted its sales were checked by capacity constraints.

Ocado’s growth slowed from 24 per cent in its first-quarter to 18 per cent in the last three months. It says it expects sales to grow by 21 per cent in the first half of the year.

An Ocado spokesman said: “The Hatfield customer fulfilment centre remains capacity constrained in the near term. Investment is continuing to increase weekly order capacity.”

The grocer, which predominantly sells the products of upmarket grocer Waitrose, said the glut of recent public holidays also hit its sales.

It added it has leased a 100,000 square foot warehouse close to its main distribution centre in Hatfield, north of London, from which to develop its non-food business.

A second core warehouse is under construction in Warwickshire, due to be finished by the end of 2012.

The slump sent Ocado’s shares, down 211p yesterday, fuelling fears that they could eventually fall below their 180p flotation price.

Last year Ocado was forced to slash its IPO valuation by 20 per cent, in a desperate eleventh hour bid to keep the float alive.

It eventually hit the bottom end of its 180-200p a share – far below its initial range of 200-275p a share.

Some analysts baulked at even the lower price, slapping a value of around 120p a share on the firm. However, after hitting a closing low of 123p, it has seen its share price creep up, hitting a high of 285p in February.

Numis analyst Andrew Wade said: “With new kit being installed, we expect a re-acceleration in the second half, and are encouraged by the impressive EBITDA conversion on incremental sales.”

Ocado was set up by former Goldman Sachs bankers Tim Steiner (pictured right), Jason Gissing and Jonathan Faiman.