Ocado share price drops despite booming sales

ocado shares

Online supermarket Ocado has seen its share price slump in early trading, despite releasing a fairly positive trading statement.

Retail revenue increased by 13.1 per cent in the 13 weeks ending 27 August, to £312.7m. The business also noted stronger growth in average orders per week in the third quarter “as we continue to acquire and retain customers”, City AM reports.

The average order value had slipped slightly to £106.25, but the number of orders were up 16 per cent to 254,000.

Despite this, Ocado’s share price fell almost seven per cent in early trading, as investors got cold feet over the business’s growth plans.

Chief executive Tim Steiner said Ocado was “scaling up our capacity in our revolutionary new Customer Fulfilment Centre (CFC) in Andover” while “preparing our fourth, and biggest, CFC to date in Erith, set to open in 2018”.

“These investments, while increasing some costs in the short term, will allow us to meet the rapidly growing demand for our services from UK consumers,” Steiner added.

Although analysts noted the strong performance, they explained that Ocado’s shareholders may be wary of more investment and disappointed that no new tie-ups were announced.

“Ocado says costs will rise in the short-term, which may be taken as an indicator of negative profit growth in the second half of 2017. Profits have not been great as Ocado keeps ploughing money into its technology,” said ETX Capital’s Neil Wilson.

Ocado’s share price jumped earlier this year amid rumours of a tie-up with Marks & Spencer (M&S), while last year the online retailer announced a deal with Morrisons.

Supermarket sales as a whole have seen the largest growth in several years over the last few months.