Ocado’s pain gets plenty of exposure in this morning’s papers after the online grocer’s share price plunged 14% after it reported profit margins were under pressure amid fierce competition between food retailers. Sales – excluding its partnership with supermarket chain Morrisons – rose 13.6% to £314m in the 12 weeks to 7 August, but the average order size dropped 3.4% to £107.94, largely because of price cuts implemented to keep pace with the supermarket price war (The Guardian).
The Mail put Ocado’s woes down to the “slow death” of the traditional weekly shop. The Telegraph reports that CFO Duncan Tatton-Brown admitted that he would not be surprised if the City cut earnings forecasts, prompting the shares to fall sharply. The City lived up to the expectation with analysts cutting their full-year profit forecasts. Numis, one of Ocado’s advisers, was one of several brokers to reduce its full-year EBITDA expectation from £87.5m to £85.1m. Others cut as much as £5m from forecasts (The Times).
The Financial Timessays that Ocado has faced increased competition in recent months from Amazon, which has expanded its own food delivery service in the UK and hired executives from major supermarkets including Tesco. In March, Amazon also struck a deal to buy groceries from Morrisons. The Telegraph’s Questor column says Ocado is still “a basket case”. “Ocado rarely fails to disappoint. There is always some reason why the pot of gold at the end of Tim Steiner’s digital rainbow remains just out of reach.”
Elsewhere, The Mail finds rooms for a small story on the profits rise at Hilton Food Group. Favourable exchange rates helped lift half-year profit 26.7% to £16.7m and the firm, which processes beef and lamb for supermarkets, also saw a 9.1% rise in sales to £631.9m for the six months to 17 July.
Cheaper hotel rooms, summer clothing bargains and cuts in the cost of alcohol helped peg the UK’s annual inflation rate at 0.6% last month, The Guardian writes. The Times reports that the latest figures came despite predictions that the slump in the value of the pound would lead to further higher prices for everyday goods and services.
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