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Still the darling in the supermarket sector for many investors, Ocado has seen its shares slump recently, potentially weighed down by the valuation of £6 billion for the company, which some traders obviously think is too high.

On top of this directors have dumped more than £100 million of Ocado shares.

A Bahamas-based trust which counts Ocado CEO Tim Steiner as a benficiary sold almost £51 million worth of Ocado shares in late August. The trust, called Linic, and which has other (undisclosed) beneficiaries than Steiner, managed to move 4.8 million Ocado shares at £10.60 each. Linic has already sold more than £127 million of Ocado shares so far this year and for many traders, the activity is regarded as one possible reason not to be in Ocado for the longer term.

Ocado is due to report to the market tomorrow, and will be giving investors some interesting data to consider. Top of the list will be retail sales. In the first half of 2018 they rose 11.7% year-on-year, excluding Ocado Solutions. The supermarket will also be reporting its average number of orders per week: this has risen consistently and in the first half of this year stood at 291,000 against 260,000 a year ago.

One area of worry was average basket size, which stood at £108, part of a longer term decline.

Analysts will be looking for commentary on the volume ramp up at Ocado’s Andover and Erith sites in the UK, which rank third and fourth among Ocado’s customer fulfillment centres. There should also be a progress report on its relationship with Morrison’s and updates on its international licensing deals.

It is these technology licensing deals that got investors more excited about Ocado in the first place, and sparked talk about a new paradigm in groceries distribution in the developed world. Ocado has secured licensing deals for its technology in France, Canada, Sweden and the United States.

Focus will be on details of Ocado’s venture in France, where it is working with Groupe Casino on its first CFC for the French market. It will be closely watched, as it will be a good indicator of how this kind of deal will work in practice, and what the contribution will be to Ocado’s bottom line.

Ocado shares have been declining fairly steadily since 23 August, when they stood at £11.14. As of this morning they were trading at £9.26. Investors will be looking for any information that convince them that Ocado should be a buy, but at this moment in time it looks very much like a hold.


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Stuart Fieldhouse

Stuart Fieldhouse has spent over 20 years in journalism and financial communications, including six years as a wealth management correspondent for the Financial Times group, covering capital markets and international private banking, and as an investment banking correspondent for Euromoney in Hong Kong.

Stuart has worked as head of content at CMC Markets, supporting the re-launch of its global financial spread betting and CFD trading platforms. He is also the author of two books on trading, published by Financial Times Pearson. Stuart continues to work with hedge funds, private banks, stock exchanges and other financial institutions on their communications, data and marketing requirements.

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