City delivers faint praise as Ocado nears profit


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The Independent Online

The City begrudgingly cut the online grocer Ocado some slack on Thursday as signs of buoyant recent sales kept the company on course for its first profit in 14 years of trading.

Its shares – which were above 600p in February – have sunk since, amid concerns over how Ocado would fare in a brutal price war among the “big four” supermarkets, which are also beefing up their online offering.

But the company managed to increase its retail sales by more than 15 per cent year on year to £218.5m in the 12 weeks to 10 August, helping Ocado’s stock up 0.9p to 312.7p yesterday. The number of orders is also increasing, although the average order size is down slightly to £111.64 as regular customers also take advantage of free delivery passes to order more often.

The chief financial officer Duncan Tatton-Brown said the grocery market remained the “most competitive in the country” but the City has pencilled in pre-tax profits of £10m to £12m this year – which would be Ocado’s  first annual pre-tax profit since it was founded in 2000.

Clive Black, an analyst at the broker Shore Capital, said: “Ocado continues to gain market share. However, we find such trading momentum from a still relatively small fish in a pond full of sharks to be reasonably underwhelming.”

John Ibbotson, an analyst at the consultancy Retail Vision, added: “Progress should not be confused with success. Praising these improving figures is like applauding the band on board the Titanic just as it starts getting icy.”