Ocado: Are price cuts and M&S magic enough to help shares recover?
Ocado will update investors on its fourth quarter trading on Tuesday, to see if a barrage of price cuts has managed to win over more customers amid the cost of living crisis.
The supermarket technology business, which owns an online grocery venture with Marks and Spencer, enjoyed big wins during the pandemic but has struggled to keep up momentum since.
As a result, most of its gains are expected to come from its robotics arm which reported a 35 per cent surge in growth during the half year.
Its retail division has managed to drag some customers back in recent months, reporting a 7.2 per cent leap in revenues back in September.
Ocado began slashing prices on its groceries to compete with rivals and appeal to cash strapped Brits.
In January, it announced it would add more than 1,700 products to its ‘Big Price Drop’ campaign.
While this campaign has managed to claw back customers, it still has a way to go before it is performing to the standards that Mark and Spencer chief Stuart Machin expects.
In November, the retail bigwig, responsible for the recovery of the high street darling, said Ocado Retail won’t reach its full potential for another three years.
“We’re very positive about the potential of Ocado (Retail) but to be quite frank … that potential is going to be realised in three plus years, not in the next 12 months or 24,” the chief told Retuers.
Shares in the firm are down by three-quarters from their short lived lockdown peak of early 2021.
Russ Mould, investment director at AJ Bell, said that analysts will be checking if its retail revenues have had any lift on last year’s reading of £548m.
He explained: “All of the focus will be on the fourth-quarter numbers, how they stack up relative to the guidance given for fiscal 2023 and whether there is any change to that guidance for the full-year to November from chief executive Tim Steiner and team.”
“Analysts and investors will then dig deeper, looking at order run rates and basket size.”
“At the third quarter stage, the order run rate was some 381,000 a week on average, with a basket size of £120.72,” he added.
“Basket size peaked at £147 during the pandemic but has continued to come in above the pre-pandemic run rate of £110. Some of this is down to inflation, however, and comments on the mix between price and volume will be of interest.”