Ocado‘s profit margins are facing negative pressure that could lead to further annual pre-tax losses in the future, according to analysts Shore Capital.
Ocado reported pre-tax losses of £12.5m for the year to 1 December 2013 – larger than its £0.6m loss a year ago.
The note says that unless the online grocer removes its price matching pledge with Tesco then it will suffer in the wake of cut prices. It said: “We continue to remain under-whelmed by the Ocado business model as we believe that Waitrose will ‘do‘ its own thing in time, creating an enormous hole at Ocado‘s Hatfield.”
Shore said it remained to be convinced that its Morrisons tie-up would work for either party.
Tesco have recently announced a highly promoted online grocery proposition for customers, including one hour delivery slots for £1 and free grocery click and collect which will create “ripples beyond the value end of the market.”
“The lowering of fulfilment costs cannot be seen as a welcome development for the specialist online player,” it warned.
Ocado stock has fallen to a six month low of 317p by 10:17am on Tuesday.