Monday, November 20, 2017

Tesco price match ‘negative development’ for Ocado, says Shore Capital

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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.

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