Easing of lockdown restrictions expected to slow growth at online retailer Ocado
The easing of lockdown restrictions is expected to have slowed down soaring retail sales growth at Ocado as the online retailer unveils it latest trading performance next week.
It was among UK grocery firms to see sales spark amid strong demand for home deliveries after the Government enforced lockdown restrictions and forced hospitality operators to shut their doors.
Ocado is therefore expected to reveal a higher sales from its retail business for the past half-year on Tuesday July 6, but with slower growth in the latest quarter after looser measures saw shoppers revert closer to pre-pandemic habits.
Nevertheless, investors are expected to focus more closely on its rapidly expanding technology solutions business and the actions it is taking to finally become sustainably profitable.
Concerns over the long search for profits and the subsequent lack of returns for shareholders have continued to weigh on its share price over the past year.
Shares are flat compared with a year ago despite favourable trends driven by the pandemic with the value also down by a third from its autumn highs.
Analysts have predicted that the company is not likely to deliver a profit until around 2024 at the earliest.
Investors will be hoping for an improvement in earnings for the past six months in a bid to speed up its journey to profitability.
In its last update in March, Ocado revealed a 39.7 per cent sales jump for its retail joint venture with Marks & Spencer for the quarter to February.
This sales growth is likely to slow but the group will be boosted by the launch of its first, mini customer fulfilment centre (CFC) in Bristol.
Its expansion plans will also be buoyed by plans for two new major CFCs and 12 micro-sites designed to support Ocado Zoom.
Shareholders will be keen for an update on Zoom as the group competes with a surge in competition from the likes of Weezy, Dija, Zapp, Gorillas and Getir in the burgeoning rapid delivery market.
It will also be keen to draw attention to early progress for the launch of CFCs in its international partnership business.
Nicholas Hyett, equity analyst at Hargreaves Lansdown, said: “CFCs launched for international customers in the solutions business are now up and running, with US partner Kroger opening its first CFC during the last quarter.
“Given the importance of International Solutions contracts to the group’s long-term profitability, performance here is far more important than a lacklustre quarter in UK retail.”
The update will also come more than a week after the business settled a legal spat with its co-founder and a former employee after they secured confidential documents from the online retail firm while they set up a competitor.
It said last month that Jonathan Faiman – who set up the business alongside Tim Steiner and Jason Gissing in 2000 but left in 2008 – and Jon Hillary “made a significant payment” to the Ocado Group as part of the settlement.