It’s not often a profits upgrade is accompanied by a share price plunge, but Ocado’s recent history in the City is anything but ordinary.

On Thursday it hiked its full-year profits forecast as Ocado Retail sales continue to boom during the pandemic. The retail joint venture with Marks & Spencer posted a fourth quarter sales jump of 35% to £579.6m as a positive customer response to M&S products, the impact of lockdown measures and a smoothed trading week compared with the peaks and troughs of shopping habits pre-Covid all helped boost demand.

Ocado said that the strong retail performance, combined with the impact of operational leverage in the retail business, meant it now expected full-year EBITDA to be over £70m – up from its most recent forecast of £60m in November and £35m in its previous financial year.

However, its shares subsequently plunged 6% back to 2,186p despite the seemingly good news.

One caveat was that Ocado Retail’s order number growth was much more modest than headline sales growth suggests, rising by just 3%. Instead, growth was driven by average order size increasing to £133 as shopping behaviour began to normalise.

This normalisation seemed to give the City pause for thought amid the global rollout of coronavirus vaccines, given that Ocado has gained hugely this year compared with its retail contemporaries. The JV was keen to stress it would boost capacity by 40% with the opening of three new warehouses, but the company did acknowledge sales and profits were dependent on the “extent to which Ocado Retail returns to a ‘normalised’ trading week” in its new financial year.

UBS analysts cautioned: “We believe the deceleration in sales may cause some concern, especially as the UK has just been in a second lockdown and as we run up to Christmas.”

“The lack of meaningful immediate profitability or a dividend, along with a recent £1bn fundraising, could be viewed as potential red flags,” said Interactive Investor’s Richard Hunter, who added that the group’s meteoric share price rise has created uncertainty around “whether the shares can maintain such a trajectory”.

Despite the share price drop on Thursday, Ocado remains more than 80% up so far this year. By contrast, Marks & Spencer is down by a third so far in 2020 and fell a further 4.8% on Thursday to 136.2p.

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