Ocado (LON: OCDO) shares have had a positive start to the year, climbing 23% in 2023, and with other retailers recently posting positive updates, investors will be eagerly awaiting the company’s fourth-quarter trading statement on Tuesday.
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However, investors may not want to get too ahead of themselves as, in its third-quarter trading statement, the company warned that cost headwinds — predominantly energy and dry ice — were likely to weigh on profitability in Q4.
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Ocado told investors that in Q4, it expects a combination of continued strong growth in customer numbers and orders to result in mid-single-digit sales growth for the quarter but a slight sales decline in FY22 and close to break-even EBITDA.
“We are optimistic for the future even while recognising the challenges that higher energy bills and other inflationary pressures are creating for our customers today,” Tim Steiner, Chairman of Ocado Retail, said in the company’s Q3 update.
Despite the negative tone, other supermarket firms such as Tesco, Sainsbury's, and part owner of Ocado retail, Marks & Spencer, have provided positive updates following the Christmas period.
Tesco like-for-like sales in the UK & ROI over Christmas increased 7.8%, while Sainsbury reported a 9.6% increase in total retail sales over Christmas, and Marks & Spencer said UK like-for-like sales over Christmas grew by 7.2%, providing a potential point of optimism for Ocado shareholders heading into Tuesday.
What’s more, Morgan Stanley said last week that new data from Kantar suggests Ocado’s performance was “strong” in December.
Kantar’s data reportedly showed Ocado sales increased by 8.2% during the 12 weeks to December 25. In addition, Morgan Stanley explained that the Kantar data indicated sales at Ocado Retail increased 20% year-on-year, which would top consensus estimates released in the first half of 2022.
Even so, Ocado has faced headwinds such as soaring inflation, a reduction in digital spending, and dampening demand, which should keep potential investors wary. According to Which, Ocado is one of the more expensive grocers, which could have further weighed on its retail sales performance in Q4.
YOUR CAPITAL IS AT RISK. 76% OF RETAIL CFD ACCOUNTS LOSE MONEY.