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(Alliance News) - Ocado is an obvious winner from the ongoing health crisis, but it remains wary, the online grocery delivery company said Thursday in a trading update.
Ocado has seen a surge in orders in recent weeks due to Covid-19. Retail revenue for the first quarter, which ended March 1, was up 10% year-on-year to GBP441.2 million. Average orders per week rose 10% to 343,000 while the average order size increase 0.3% to GBP110.24.
"The impact of higher basket values and order demand, amid growing public concern over the coronavirus, was limited in the quarter, although this has since picked up significantly," said Melanie Smith, Ocado Retail's chief executive officer.
The online grocer said growth in the second quarter "is so far double that" of the first due to the coronavirus outbreak.
However, Ocado said it expects the impact of forward buying to unwind "at some point".
Ocado said its guidance for retail revenue growth in the current financial year of 10% to 15% is unchanged at this point, as the company assumes there has been a "large element" of forward buying some items, and added that there may be "further disruptions" ahead.
"However coronavirus unfolds, what is clear is that the fundamentals at Ocado Retail are strong, illustrated by double-digit increases in customer orders, driven by consistent execution, which deliver a best-in-market customer experience," Smith said.
"Preparations for the M&S switchover from Waitrose, this September, are on track," she added.
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: called up 46.42 points, 0.9% at 5,127.00
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Hang Seng: down 1.9% at 21,861.19
Nikkei 225: closed down 1.0% at 16,552.83
DJIA: closed down 1,338.46 points, 6.3%, at 19,898.92
S&P 500: closed down 5.2% at 2,398.10
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GBP: down at USD1.1520 (USD1.1755) - 35-year low
EUR: up at USD1.0872 (USD1.0840)
Gold: down at USD1,484.95 per ounce (USD1,491.90)
Oil (Brent): down at USD25.93 a barrel (USD26.08)
(changes since previous London equities close)
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ECONOMICS AND GENERAL
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Thursday's Key Economic Events still to come
1000 CET Germany Ifo economic forecast
0830 EDT US initial jobless claims
1000 EDT US leading indicators
1030 EDT US EIA weekly natural gas storage report
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UK Prime Minister Boris Johnson was adamant he would not ask for an extension to the Brexit transition period despite the mass disruption caused by the coronavirus pandemic. The prime minister insisted there will be no delay past the end-of-year deadline, even though trade negotiations scheduled for this week had to be cancelled. However, regardless of the disruption, the UK and the EU did exchange draft legal texts for the future relationship on Wednesday evening. Britain was understood to have shared a negotiating document detailing a desired free trade agreement, plans for aviation safety and a civil nuclear agreement.
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The Republic of Ireland faces significant job losses and an economic shock due to the Covid-19 pandemic, the finance minister has said, as he introduced a suite of measures to help bank customers. Paschal Donohoe was speaking as Irish banks agreed on Wednesday to introduce a payment break of up to three months for customers who cannot pay their mortgage. The payments were announced following a meeting of the Republic's five main banks, and their representative group the Banking & Payments Federation Ireland. AIB, Bank of Ireland, KBC, Permanent tsb and Ulster Bank, said they would work together to ensure that continuity of service plans are in place for customers.
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Early signs of the scale of the damage to the German economy wrought by the coronavirus crisis are likely to emerge on Thursday when the Munich-based Ifo institute releases key data from its March business confidence survey. The institute plans to publish a preliminary version of its closely watched monthly survey of 9,000 German executives to coincide with the release of its new set of economic forecasts for the country. German investor confidence plunged in March, with the ZEW survey of analysts and institutional investors released this week chalking up its biggest-ever fall.
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Australia and New Zealand moved to seal off their borders Thursday, announcing unprecedented bans on entry for non-residents in the hope of stemming the rise of COVID-19 infections. Prime Minister Scott Morrison said the ban on anyone who is not a citizen or permanent resident coming to Australia "will be in place from 9:00 pm tomorrow evening". A similar measure was announced by his New Zealand counterpart Jacinda Ardern, who acknowledged: "I recognise how extraordinary this is. In no time in New Zealand's history has a power like this been used." Australia and New Zealand have announced a slew of restrictions to tackle the pandemic, but have so far stopped short of closing schools or instituting wider-ranging lockdowns.
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BROKER RATING CHANGES
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HSBC RAISES NATIONAL GRID TO 'BUY' (HOLD) - PRICE TARGET 1065 (1075) PENCE
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RBC RAISES SMITHS GROUP TO 'TOP PICK' ('UNDERPERFORM') - TARGET 1300 (1690) PENCE
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JEFFERIES RAISES TAYLOR WIMPEY TO 'BUY' ('HOLD') - TARGET 206 (243) PENCE
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JEFFERIES RAISES BARRATT DEVELOPMENTS TO 'BUY' ('HOLD') - TARGET 729 (861) P
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COMPANIES - FTSE 100
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Burberry said Covid-19's hit to trading has "intensified" in recent weeks. The luxury retailer said comparable retail store sales have been tracking 40% to 50% lower over the past six weeks. Trading in mainland China has started to improve, but sales in Europe, Middle East, India & Africa, as well as the Americas, have fallen "materially" in the past few weeks. More than 60% of stores in EMEIA and 85% of those in the Americas are currently closed. As a result of all this, Burberry expects comparable retail store sales to be down by 70% to 80% for the final weeks of the financial year. For the fourth quarter, comparable sales are to be around 30% lower. Burberry said it has "significant" financial headroom, including liquidity of GBP900 million.
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Next said it stands ready to weather a significant hit to sales from Covid-19, as it reported growth in annual profit. Total sales for the financial year ended January were up 3.3% to GBP4.36 billion, while pretax profit rose 0.8% to GBP728.5 million. Turning to Covid-19, Next said that when the pandemic first appeared in China, it assumed the threat was to its supply chain. "It is now very clear that the risk to demand is by far the greatest challenge we face, and we need to prepare for a significant downturn in sales for the duration of the pandemic," said Next. The retailer said the conclusion of a stress test showed the business could comfortably sustain the loss of more than GBP1 billion of annual full price sales without exceeding its current bond and bank facilities. For the year ahead, the firm expects full price sales to grow 3.1% in the recently-commenced financial year, versus 3.7% in the recently ended one.
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The boss of easyJet has warned airlines could go bankrupt amid the coronavirus outbreak without the support from the UK government. Johan Lundgren, who appeared in a pre-recorded interview with Robert Peston on ITV on Wednesday evening, said the airline has so far cancelled 14,000 flights this month as the virus continues to spread. His warning came as Ryanair announced it will cancel more than four out of five flights between Thursday and March 24 with an exception for "essential connectivity" journeys. Airline Jet2.com has suspended all of its flights until next month. During his interview on Peston, Lundgren said: "Everything from the Gulf War to the 9/11 to the Sars and the financial crisis in 2008 and ash cloud, there is nothing as bad as what I see right now. And the issue around it is really the uncertainty. You know, when is this going to end."
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COMPANIES - FTSE 250
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National Express said it has seen a "significant decline" in passenger numbers in recent weeks due to Covid-19. The transport operator said it has already taken measures to reduce its cost base and protect cash flow. In the UK, its coach service it reverting to a network similar to its Christmas Day service, removing up to 80% of capacity. UK bus is reducing its networks similar to a typical Sunday service, which amounts to the removal of around 40% of bus mileage. Following the recent refinancing, National Express currently has committed fixed borrowing facilities of more than GBP1.3 billion and will retain this level for at least the next 18 months. Current undrawn committed facilities total around GBP500 million.
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COMPANIES - INTERNATIONAL
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Deutsche Lufthansa reported moderate revenue growth in 2019 but a drop in profit and warned its earnings will take hit from coronavirus in 2020. The German airline said revenue in 2019 grew by 2.5% to EUR36.42 billion from EUR35.54 billion a year earlier, but pretax profit fell by a third to EUR1.86 billion from EUR2.78 billion. Profit was hurt by increased staff costs, which were up 3.5% to EUR9.12 billion from EUR8.81 billion the year earlier, while materials and services expenses grew 7.9% to EUR19.83 billion from EUR18.37 billion. Lufthansa said it will not be paying a dividend for 2019, having paid an EUR0.80 per share payout a year ago. Revenue is expected to be "significantly" lower in 2020 than in 2019.
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Thusday's Shareholder Meetings
Impax Asset Management Group
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By Tom Waite; thomaslwaite@alliancenews.com
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