UK online retailer Ocado revealed mixed half-year results today, with sales up but pre-tax profits flat and a fall in operating profit. While some analysts tried to look for positives, the numbers were described as "poor" in some quarters in the City, with concerns over the outlook for Ocado and its shares fell by more than 20%.

Shore Capital analyst Darren Shirley

"Whilst we recognise that we may have a reputation for perceiving Ocado from a position of caution, these are poor results with a far from compelling outlook statement. Indeed, further downgrades could be down the line, albeit we will take the luxury of waiting for Q3 trading before we dust off our well-used 'red pen' with respect to Ocado. 

"Ocado is seeking to rebuild its sales momentum, aided by reasonably frequent discounts on orders at present, and has stated that Hatfield capacity will build to 160k orders/week when recent upgrades ramp-up. Whilst this is so, we are somewhat dispirited by a current trading statement that does not indicate an acceleration in trading, which is what management had previously guided to. To our minds, it will remain some years for Ocado to deliver meaningful profits, should that outcome ever occur. As such, we continue to believe that the company's stock has an inflated valuation and we struggle to see why it has the multiples that it does because Ocado is not a business that generates industry-leading growth, margins, cash or capital returns.

Conlumino senior consultant Joseph Robinson

"Ocado is making positive strides and we believe that many of its current focuses - in particular in own-brand and non-food - are sensible in relation to the long term evolution of the retailer. It seems to have overcome the issues that so impacted its main Hatfield site at the end of 2011, and claims to have operated at record capacity during its H1 period. Ocado continues to focus on strengthening its service credentials, which represents one of its key differentiators.

"Looking ahead, the third quarter is looking slightly more uncertain. Ocado experienced disruption from the Jubilee events, and can expect the Olympics games will also have some adverse impact on delivery fulfilment...Question marks persist in relation to the potential for Ocado's model to achieve profitability."

Verdict senior retail analyst Cliona Lynch

"Ocado's sales remain in double digit growth year-on-year as a slight decrease in basket size was offset by an increase in the frequency of shop and in the number of active customers. 

"Profits, however, are down for H1 2011/12, from GBP2.4m last year to GBP1.7m this year. This is partly as a result of increased marketing costs, as vouchers form an integral part of winning over new customers... Own brand products are showing steady progress and are now in 80% of baskets, up from 68% in H1 of 2010/11. Multichannel take-up is also growing among Ocado's customers with mobile now used in 24% of checkouts

"While continuing sales growth is reassuring, investors will seek further profit growth from the retailer to justify a more long term outlook."