Ocado finally delivers a profit

Shares in Ocado have slid despite the online supermarket making its first profit in 14 years.

Online grocer Ocado reported a pre-tax profit of £7.5m for the six months to the end of May, which leaves it on track for the first annual pre-tax profit since its launch in 2000.

It noted, however, that sales growth has slowed from 18% year-on-year in the first quarter to 15.6% over the half-year as a whole, when sales exceeded £400m. The average order size has declined marginally to £114.30.

What the commentators said

For instance, why are sales rising only slightly faster, or broadly in line with, the overall online grocery market? After all, chief executive Tim Steiner has said he thinks the big supermarkets' online offerings are years behind Ocado when it comes to quality and accuracy of service.

Investors worry that Ocado, even if it does have a bright long-term future, could now fall victim to the supermarket price war, said The Daily Telegraph.It "cannot remotely match the physical and financial scale of Tesco".

It hasn't been able to make a profit selling the high-margin products it gets supplied from Waitrose, added The Daily Telegraph, so "what hope does it have when margins decline"?

Furthermore, the price war has crept onto Ocado's home turf: online shopping delivery charges. Grocery shopping is undergoing the upheaval Ocado has always predicted. But that "does not mean it will be one of the winners".

Recommended

The MoneyWeek Podcast: picking stocks is fun, but you need to do your homework
Investment strategy

The MoneyWeek Podcast: picking stocks is fun, but you need to do your homework

John Stepek talks to Steve Clapham, investor, analyst and author of The Smart Money Method, about the dangers in picking individual stocks and why you…
8 Apr 2021
BP looks set to return more money to shareholders as it beats expectations
Energy stocks

BP looks set to return more money to shareholders as it beats expectations

Oil major BP is to embark on a share buyback programme after significantly reducing its debts. Saloni Sardana looks at what it means for your portfoli…
6 Apr 2021
Deliveroo has hit the market – but it’s not getting the warmest welcome
UK stockmarkets

Deliveroo has hit the market – but it’s not getting the warmest welcome

Food delivery company Deliveroo made its debut on the stockmarket this morning. But with the share price sliding by 30% straight away, it’s not made t…
31 Mar 2021
Three stocks to buy now that will come back stronger after Covid-19
Share tips

Three stocks to buy now that will come back stronger after Covid-19

Professional investor Ed Wielechowski of Odyssean Capital, chooses three compelling stocks that should thrive in a post-pandemic world.
29 Mar 2021

Most Popular

The bitcoin bubble will burst: here’s how to play it
Bitcoin

The bitcoin bubble will burst: here’s how to play it

The cryptocurrency’s price has soared far beyond its fundamentals, says Matthew Partridge. Here, he looks at how to short bitcoin.
12 Apr 2021
Four investment trusts for income investors to buy now
Investment trusts

Four investment trusts for income investors to buy now

Some high-yielding listed lending funds have come through the crisis with flying colours. David Stevenson picks four of the best.
12 Apr 2021
Central banks are rushing to build digital currencies. What are they, and what do they mean for you?
Bitcoin

Central banks are rushing to build digital currencies. What are they, and what do they mean for you?

As bitcoin continues to soar in value, many of the world’s central banks are looking to emulate it by issuing their own digital currencies. But centra…
8 Apr 2021