Ocado Advert 3

Ocado’s fall from grace on the stock market has been spectacular. From a 2,895p high in September 2020, it fell to 730p this week, after warning in a Q2 update (to 25 April) that, with sales trending 9% lower than in 2021, sales growth would be limited to low single digits and margins the same. The share price hasn’t been this low since 2018. Well before the pandemic.

Naturally Ocado has blamed the cost of living crisis. Even among Ocado’s upmarket clientele it only takes the removal of a couple of items from the basket of freaked out shoppers for sales to have fallen 8% in Q2 (versus 5.7% in Q1). The crash has also coincided with a return to more normal shopping patterns (with online grocery sales down 15% y-o-y in April), amid a flight to value, while Ocado also faces soaring costs of goods, energy, distribution and (despite the robots) labour like everyone else.

It’s also the case that this is not just an Ocado issue. Online and retail tech stocks generally are being hammered, including Amazon and Netflix, more than bricks and mortar stocks.

And having poured billions into online, investors have been spooked, urging stocks to prove they can be profitable. Which is why wings are also being clipped in the rapid delivery space.

In the case of Ocado, however, one also wonders if there’s a disconnect. In our Online 33 this week, Ocado was the most expensive even with free delivery. So one wonders why it keeps pushing its value message, whether in its ridiculous ‘everyday savers’ ad campaign, or the barrage of promotional offers and messages that now accompany the shop, or the pushy hustle from no less than four checkout prompts. People aren’t stupid. Everyone knows Ocado is a premium service. It’s almost an insult telling us how great value it is.

No one in grocery can afford to ignore the cost of living crisis. On Thursday, shares in Ocado even rallied on news of the Chancellor’s windfall tax. But instead of a shop that speaks to Ocado’s strengths (incredible choice, superb service, the best AI-based search), it’s shoving value down the customer’s throat – and it starts to grate.

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