How will an increasingly international Ocado (LON:OCDO) fare following next Tuesday’s half year results?
Long the preserve of short-sellers, the online supermarket has sky-rocketed in 2018. Building on the announcement of a deal with France’s Casino (LON:0HB1) last November, Ocado has unveiled a whole host of international tie-ups, all involving the implementation of the firm’s Smart Platform. January saw an agreement with Canada’s Sobeys, while the start of May brought details of a similar transaction with Sweden’s ICA Group.
Yet real biggie was yet to come. On May 17th Ocado finally entered the US market by signing an exclusive contract with supermarket giant Kroger (NYSE:KR). While the stock had been doing well before this point, rising from an opening price of £3.87 to tease £6 in March and early May, the Kroger news was transformative.
Between May 17th and June 11th the stock’s value doubled, hitting an all-time high of £11.36 on the latter date. It’s pulled back a bit since then, but not by much, with Ocado Group at a current trading price of £10.35.
All this is heady, heady stuff, the kind of news that ratchets up the pressure on Ocado to deliver with each update. That was something the company couldn’t quite achieve with March’s first quarter statement. The figures themselves were fairly strong: revenue rose 11.7% to £363.4 million – down on the 13.1% rise seen for the same period the year previous – while average orders per week jumped 11.1% to 280,000. However, the impact of the ‘Beast from the East’ dragged revenue 1% lower than it would have been otherwise, the cold snap more importantly also leading to a £1.5 million hit to its profits.
In terms of Tuesday’s interim results, investors will want to see that growth picked up the pace in the second quarter, with special attention paid to the firm’s profit numbers. Any further details on its international deals will also be very welcome.
Ocado Group PLC has a consensus rating of ‘Hold’ alongside an average target price of £5.39.
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