Full year guidance has been suspended though as the future remains uncertain during the crisis
Coronavirus pandemic sees Ocado report 40% surge in sales
- Group delivers good news to investors with 40.4% surge in sales in retail business in Q2, boosted by stockpiling
- Suspends full year guidance due to uncertainty about how long the crisis will last and how customers will behave when it is finally over, despite reports showing shopping behaviours are returning to more normal levels already
- Solutions business remains immune to the crisis and delivered the first two fulfilment centres for two major retail groups recently
- Recommendation: We maintain our Hold recommendation for investors seeking growth and willing to accept a medium to high level of risk
Ocado delivered some good news for its investors today as it reported a 40.4% surge in sales in its retail business so far in the second quarter. That compares to the 10.3% increase seen in the first quarter and underlines the scale of demand it has faced for its grocery deliveries during the coronavirus crisis. The company also said the growth in the size of orders appeared to have peaked, with shopping behaviour returning to more normal levels. Capacity at its warehouses has been increased to cope with demand, but Ocado has suspended full year guidance due to uncertainty about how long the crisis will last and how customers will behave when it is finally over. There was also good news at the Solutions business which has not been impacted by the crisis and delivered the first two fulfilment centres for two major retail groups recently.
The market responded positively to these results with shares rising 3% to a new record high in early trading. These are excellent results from both sides of the Ocado business, although not entirely unexpected. The fact that the company has £1.2bn in cash is also a positive for investors and provides it with options for the future in how it invests in growing the business. It’s right to expect the move to online grocery shopping to grow even after the pandemic has subsided, although much of that will depend on the success of the new Marks & Spencer delivery service which is due to begin later this year. The shares remain a hold for investors seeking growth and willing to accept a medium to high level of risk.
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