Ocado shares move 6.8% higher in early trade

Tuesday, 9th July 2019 09:15 - by Rajan Dhall

OCADO shares are up 6.3% this morning after an impressive half-year report. The group have announced the fire at the Andover warehouse cost around GBP 148.2mln which is less than market expectations. One of the highlights for the company is the fact they signed a £750m delivery deal with M&S earlier this year. The deal replaces Ocado’s sourcing deal with Waitrose, with M&S products set to be available on Ocado.com by September 2020 this is seen to be much more affordable for the end user. The fire at the warehouse facility will put a GBP 15mln dent in its underlying earnings this year, but the majority of the costs were offset by £11.8m in insurance payouts.

Elsewhere: 

• Strong underlying growth, with active customers up 9.7% to 745,000 vs 1H 2018: 679,000
• Total order volumes from Ocado.com and Fetch now an average of 318,000 orders per week vs 1H 2018: 288,000
• Fees invoiced from Solutions partners of £122.7 million, up 36% and the report showed a 9.7% Retail Revenue growth

Looking at the weekly chart below it seems that the market were expecting more of an impact from the fire. Now the momentum has shifted back up and 1110p has held as a support. If the level continues to hold then a retest 1444.5 could be tested again or even extended. The alliance with Marks and Spencer and Morrisons should increase Ocado's appeal to the mass markets and grow the retail side of the business. There is also a trendline on the chart which still remains intact if we break this level then I would be worried about a trend change but until that happens it seems a test of the previous high is the more probable target. Four weeks ago there was an important test outlined by the hammer candle. The low of 1073p was rejected and the share price moved swiftly higher to current levels.

The Writer's views are their own, not a representation of London South East's. No advice is inferred or given. If you require financial advice, please seek an Independent Financial Adviser.