Shares in Ocado (LSE: OCDO) increased by 4% to 325p in early trade — making the online grocer the biggest FTSE 250 riser. Sales rose by 15.5% to £218.5m in the three months to 10 August, but price competition had a negative impact on average order size, which fell 1.7% to £112.
“We are pleased with the continued steady growth in our business despite the increasingly competitive nature of the market,” the chief executive, Tim Steiner, said.
The grocery sector has seen an increased level of promotional activity — with Tesco and Morrisons cutting prices as discount rivals Aldi and Lidl gain market share. Ocado added that intends to grow sales “broadly inline with, or slightly ahead, of the online grocery market”.
Ocado’s tie up with Morrisons continues to scale successfully with demand, which could lead to similar partnerships with other retailers in the future. The company will start building a third distribution centre this year as it looks to begin providing logistics for overseas retailers.
Ocado is trading on a price-to-earnings ratio of 70 for the year ended 2015. Overpaying for a company is a risky, and the decision to ‘buy’ — depending on if you believe the company can live up to these expectations — is solely down to to you.
