Ocado (OCDO) gets grocery venture green light from investors after strong sales

First update from Ocado Retail is positive following M&S partnership.

Article updated: 17 September 2019 11:00am Author: Graham Spooner

  • An uptick in weekly orders gave Ocado’s share price a modest boost in early morning trading.
  • The results were the first for Ocado Retail, the online grocer's retail arm created as part of its £750million joint venture with Marks & Spencer.
  • We continue to recommend Ocado as a ‘Hold’ for medium to high risk investors.

Following the joint venture with M&S, this is the first update for Ocado Retail and the group reported strong results. While retail revenue rose 11.4%, remaining in line with the full year guidance, it’s interesting to see behaviour change among its customers, as the value of average orders per week increases – reflecting a slightly higher frequency of purchase.

While Ocado’s retail business holds a modest 1.4% share of Britain’s grocery market, its warehouse technology is increasingly attracting retailers and the group is increasing its focus on developing and selling its technology and systems to major retailers around the world who are looking to increase their online sales.

This first set of results show what the group’s chief executive has described as ‘resilience’; but time will show the true resilience of the group with what could be an uncertain period ahead; Waitrose customers may leave when the M&S deal starts and the precise level of profitability from the new retailer agreements is uncertain, not to mention the geopolitical uncertainty in the background.

Our view on Ocado - Hold

At this point we can only recommend the shares as a ‘hold’ for investors seeking growth and willing to accept a medium to high level of risk.

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Graham Spooner

Investment Research Analyst

Graham started out as a fully authorised dealer on the Stock Exchange trading floor and for various banks, before becoming an FCA-approved investment adviser. Now a respected voice in the media, Graham’s share tips and comments on the markets are frequently sought by the national press.