LONDON BRIEFING: Online grocer Ocado sees lower revenue, rising costs

(Alliance News) - Ocado Group on Tuesday said revenue in its retail joint-venture alongside Marks & Spencer fell in the recent quarter, as lockdown restrictions were eased in the UK and the online supermarket suffered another fire at one of its distribution centres.

Ocado also warned of rising costs due to labour shortages.

Revenue dropped by 11% to GBP517.5 million in the 12 weeks to August 29 from GBP578.8 million a year before.

Average orders per week rose 1.4% to 338,000 from 333,000 a year earlier.

"Over the first 6 weeks of the quarter, the business was performing in line with expectations, with revenue marginally down 1.8%," Ocado said.

It put this down to strong comparatives from a year earlier, when more virus restrictions were in force, benefiting the online-only grocer.

Also during the period, Ocado had reported a fire at a customer fulfilment centre in London following a collision between three robots.

Ocado added: "In the remaining seven weeks of the quarter, and due to the disruption caused by the fire, revenue declined by 19%. In addition to the need to cancel orders in the week following the fire, the temporary reduction in capacity reduced our ability to offer slots to new customers."

The disruption lost Ocado around GBP35 million worth of revenue, it said.

"Operating losses during the second half due to the business disruption, primarily lost orders, caused by the fire are estimated to be around GBP10 million as the CFC ramps back up to full capacity," the company added.

"Rising costs of labour, particularly for LGV and delivery drivers represent an increasingly important issue for the industry that may result in up to GBP5 million of impact to full year numbers, reflecting additional measures being taken to hire new staff including raising hourly rates and offering signing-on bonuses. We will be working to mitigate these costs as best we can."

Separately on Tuesday, market research firm Kantar said Ocado's sales declined by 1.5% on a year before in the 12 weeks to September 5, though were still up 42% from two years ago. Its UK market was unchanged at 1.8%.

Ocado shares were down 4.7% early Tuesday.

Here is what you need to know at the London market open:

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MARKETS

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FTSE 100: down 0.3% at 7,045.51

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Hang Seng: down 1.3% at 25,471.63

Nikkei 225: closed up 0.7% at 30,670.10

DJIA: closed up 261.91 points, or 0.8%, at 34,869.63

S&P 500: closed up 10.15 points, or 0.2%, at 4,468.73

Nasdaq Composite: closed down 9.91 points, or 0.1%, at 15,105.58

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EUR: up at USD1.1815 (USD1.1807)

GBP: up at USD1.3853 (USD1.3840)

USD: up at JPY110.04 (JPY109.95)

Gold: down at USD1,792.44 per ounce (USD1,795.77)

Oil (Brent): up at USD74.00 a barrel (USD73.57)

(changes since previous London equities close)

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ECONOMICS AND GENERAL

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Tuesday's Key Economic Events still to come

1100 BST Ireland labour force survey

0600 EDT US NFIB index of small business optimism

0830 EDT US consumer price index

1630 EDT US API weekly statistical bulletin

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The number of people out of work in the UK remains above pre-virus levels but ticked down in the three months to July, according to estimates from the Office for National Statistics released on Tuesday. The UK unemployment rate was reduced to 4.6% in the three months to July from 4.9% in the previous three-month period. However, the ONS noted the jobless rate still sits 0.6 percentage point higher than pre-pandemic levels. The figure was in line with market expectations cited by FXStreet. "May to July 2021 estimates show a continuing recovery in the labour market, with a quarterly increase in the employment rate, while the unemployment and economic inactivity rates decreased," the ONS explained. The ONS added that average earnings during the period, including bonuses, were 8.3% higher, topping market consensus of 8.2% growth, but slowing from 8.8% in the three months to June. Stripping out bonuses, wage growth was 6.8%, in line with market estimates but off the pace of 7.4% in the preceding period. In August alone, the ONS said job vacancies rose past 1.0 million for the first time since records began. They are now 249,000 above pre-virus levels.

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Industrial production in Japan declined in July from the month before and rose at a slower pace when compared to a year ago, revised data showed. According to the Ministry of Economy, Trade & Industry, industrial output jumped by just over 12% annually in July, having risen 23% in June. On a monthly basis, output fell by 1.5% in July, after rising by 6.5% in June. The figures for industrial production were unchanged from preliminary estimates by METI.

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BROKER RATING CHANGES

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EXANE BNP CUTS IAG TO 'NEUTRAL' (OUTPERFORM)

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BARCLAYS CUTS BHP TO 'EQUAL WEIGHT' (OVERWEIGHT) - PRICE TARGET 2,000 (2,500) PENCE

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BERENBERG CUTS ITM POWER TO 'SELL' ('HOLD') - TARGET 350 (400) PENCE

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COMPANIES - FTSE 100

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JD Sports said revenue in the first half to July 31 jumped 53% to GBP3.89 billion from GBP2.54 billion a year earlier, as bumper demand for sports apparel continued. Pretax profit surged to GBP364.6 million from GBP41.5 million. Pretax profit before exceptional items multiplied to a record GBP439.5 million from GBP61.9 million a year earlier and GBP158.6 million two years prior. Executive Chair Peter Cowgill predicted headline profit before tax for the full year of at least GBP750 million. Back in April, JD Sports had predicted headline pretax profit, meaning before exceptional items, to be GBP475 million to GBP500 million in the year to January 2022. Pretax profit by the same measure was GBP421.3 million in the year that ended this past January 30. This was down 4.0% from GBP438.8 million the year before. There was no interim payout declared on Tuesday, but a "larger final dividend" could come, depending on JD's fortunes in the remainder of its financial year, it said.

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COMPANIES - MAIN MARKET AND AIM

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Made.com posted a 61% revenue hike in the six months to June 2021, a record half for the online furniture retailer. Revenue rose to GBP171.0 million from GBP106.3 million. Its pretax loss slimmed to GBP10.1 million from GBP15.2 million a year earlier. "I am very pleased with the progress made in the first half of the year, which is in line with the long-term goals set out at our IPO in June. We have continued to see strong and sustained consumer demand for our exclusive, design-led products and have gained significant market share with growth in all eight of our markets," Chief Executive Philippe Chainieux said. "I am confident in the outlook for the full year and in Made's long-term growth." Annual revenue is expected to rise by about 65% to GBP410 million.

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Tuesday's Shareholder Meetings

Baker Steel Resources Trust Ltd - AGM

Jade Road Investments Ltd - AGM

Mercia Asset Management PLC - AGM

Tremor International Ltd - AGM

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By Tom Waite; thomaslwaite@alliancenews.com

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