Ocado LON:OCDO is hoping for good numbers tomorrow (16th July) to prove to a sceptical market that it is on the road to recovery after the online grocer had an anaemic few years.
In its last set of results for the year to end-December 2023, published in March, the FTSE250 company had a leaden 2023, and although group revenue was up 9.9% to GBP2.8bn, the company reported a loss before tax of GBP394m (which included a GBP187m injection appertaining to a settlement reached with AutoStore over a global patent dispute, where AutoStore agreed to pay GBP200m to Ocado over two-years).
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The company’s disappointing performance was better than previously issued guidance. By the end of March, when Ocado issued a Trading Statement, its management was sounding a much more positive note. In the first quarter of the new financial year the Hatfield-based company saw its volumes up 8.1% year-on-year with retail revenue growth of 10.6% to GBP645.3m. The company also reported that its had grown its online market share, which was up 13.5% by the end of February and up 0.7% over the year.
Ocado results showed orders up and customers buying more
When compared to the same period in 2023, Ocado reported average orders per week up at 8.4% and people were buying more per visit, with the average basket value increasing by 2.1% y-o-y.
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It is hoped that the progress that Ocado showed in the first quarter will have continued through to the full half-year. The company issued guidance that it would exceed an expected improvement of GBP100m in cash flow, would expect capex of around GBP475m, a growth in technology revenues of around 15% to 20%, with its logistics division showing high single percentage volume growth, retail in mid-high single digit percentage growth and an underlying EBITDA margin of around 2.5%, with EBITDA from Logistics stable at around GBP30m.
Rowing back from a GBP394m – albeit a significant improvement from the GBP500m loss in 2022 – is going to be a big ask, however the market will be encouraged if the GBP3.2bn company is making strides in the right direction.
Positive #OCDO share activity
Shares opened the week (15th July) at 334p, but strong buying on Monday morning saw the share price jump up to 359.22p in early trading, before settling back to 345.22p by 1030. However over one-year the share price hasn’t been as encouraging.
A year ago, Ocado was trading at 581p. By the end of July 2023, the retailer’s share had ramped up to 976.4p, hitting a temporary high of 1,017p. However, as the summer break began in earnest, Ocado’s shares only headed one way and over one-year the shares have declined 42.5%. Over the year-to-date, Ocado shares are down 54.8%.
Investors will be closely watching Ocado’s results tomorrow, hoping for a strong showing that signals a turnaround after a challenging year. While the company is still grappling with significant losses, early signs of progress in online market share, order volume, and revenue growth offer a glimmer of optimism. Meeting or exceeding their own guidance for cash flow, technology revenue, and logistics growth will be crucial in rebuilding market confidence and propelling Ocado back onto a path of sustainable recovery.
