Ocado's share price has had a positive calendar year, after the first half of its financial year proved to be a successful period, though not without its setbacks. Revenue for the period jumped by 10.5% to £874m, while fees received from solutions partners increased by 36%. Adjusted earnings for the six months came in 46% lower at £18.7m however, which reflected the impact of the fire at its Andover distribution centre earlier in the year.
For the 13 weeks to 1 September, Ocado’s revenue rose 11.4% to £386.3m, on track to meet its guidance of 10-15% growth for the second half. Ocado’s revenue growth was expected to be between 10% and 11% in the fourth quarter, spanning 13 weeks to 1 December, with growth in orders via Ocado Zoom, its ultra-fast delivery service.
Ocado partner up
It’s been a very busy year for the flourishing online supermarket, as numerous deals and partnerships have granted Ocado a ticket to the big league of the online grocery retailers. In February, Ocado struck a £1.5bn food delivery deal with Marks & Spencer, which will come into effect in September 2020, once Ocado’s deal with Waitrose expires. M&S will pay £750m for a 50% share of the new Ocado.com joint-venture.
In March, the group confirmed it was entering an agreement with Coles of Australia, with the aim of creating fulfilment centres in Sydney and Melbourne to be operational in four years. This sent Ocado’s share price up 6% on the day, to reach a new record high.
In November the online grocer struck a deal with Japan’s Aeon supermarket chain to help develop its e-commerce business, which is expected to see sales capacity rise £4.2bn by 2030. The latest deal gave Ocado’s shares a lift, as they rose as much as 15% in early trading following the announcement. The investment into the business structure has seen the company make a series of promising deals around the globe, with the hope that it will pay out positive results in the long run. These deals could further benefit Ocado’s share price in the future, and will leave investors optimistic about both the upcoming Q4 results and for the longer term.
Extinguisher on aisle 4
In February, the company had the misfortune of a fire breaking out at its Andover fulfilment centre in Hampshire, where the damages cost £110m knocking 2% off its sales. Another fire broke out in August, this time at its Erith depot in south-east London. Ocado’s share price fell by 3% at one stage following the news. The results of the fires rattled investors, and Ocado will be hopeful there will not be any further setbacks.
Ocado share price growth potential
Ocado was seen as a subsidiary online grocery store for many years, and was highly-criticised for not making a profit – even having to cut its offer price when Ocado's shares were first sold on the stock exchange in 2010. Now the company is gaining partnerships around the world, tackling the giants of the online food delivery industry. Those deals have powered the group’s £9.3bn stock market valuation up 68% this year alone.
Disclaimer: CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although we are not specifically prevented from dealing before providing this material, we do not seek to take advantage of the material prior to its dissemination.
CMC Markets Singapore may provide or make available research analysis or reports prepared or issued by entities within the CMC Markets group of companies, located and regulated under the laws in a foreign jurisdictions, in accordance with regulation 32C of the Financial Advisers Regulations. Where such information is issued or promulgated to a person who is not an accredited investor, expert investor or institutional investor, CMC Markets Singapore accepts legal responsibility for the contents of the analysis or report, to the extent required by law. Recipients of such information who are resident in Singapore may contact CMC Markets Singapore on 1800 559 6000 for any matters arising from or in connection with the information.