UK: Ocado sales growth fails to convince analysts
Ocado has posted sales growth of 18% for the first quarter of 2014
UK online specialist Ocado today (12 March) reported a jump in first-quarter sales but the result failed to convince the City and its shares tumbled.
Ocado reported a 22.6% rise in gross sales to GBP227.5m for the period ended 23 February.
Average orders per week also grew 18.4% to 155,152, although the average order size fell slightly by 0.4%.
CEO Tim Steiner said he was "pleased with the continued growth of the business".
He added: "While we are encouraged by our current trading, the retail environment remains both challenging and competitive, and we expect to continue growing in line with, or slightly ahead of, the market."
However, Shore Capital analysts Clive Black was uncertain about the outlook for Ocado. Hitting out at its business model, Black pointed to the "total failure to generate profits" and suggested partners Waitrose and Morrisons could end their agreements with Ocado in the future.
"We remain convinced that this model will not work and that in time there is a greater likelihood than not that both Waitrose and Morrisons will walk away from Ocado in our view," Black said.
He added Ocado could see margins come under pressure as Tesco sharpens its prices. Ocado matches the prices Tesco charges for brands, excluding promotions.
Shares in Ocado were down 5.33% at 541.5p at 12:40 GMT.
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