It was kerching! for Ocado’s founders as the etailer pulled off its IPO in the face of widespread City scepticism, although the flotation price did not meet original ambitions.
Listed at 180p per share last week, Ocado’s stock promptly headed south. As unconditional dealings got under way the shares ticked up to close at 166p on Tuesday.
Broker Oriel, which initiated coverage with a sell recommendation, said Ocado has “many merits” but warned: “We find it hard to justify the share price as Ocado trades in what will become an increasingly crowded part of the food retail industry. Home delivery will show good growth over the coming years and without doubt the majors will give this part of the market their full attention, making life increasingly difficult for Ocado.”
The online grocer is understood to be organising a visit next week to its state-of-the-art Hatfield centre for unconnected analysts, who were among the most outspoken critics of its IPO valuation.
General retailers outperformed their food counterparts over the week, led by Topps Tiles, which was the sector’s biggest riser. There was no obvious reason for Topps’ advance, which observers say is probably a delayed reaction to a recent encouraging update and analysts’ visit.
Panmure Gordon is optimistic about the prospects for clothing retailers and sees the opportunity for them to pack in some extra margin at the back-end of this year.
The broker said earnings estimates could be revised upwards but the possibility remains that investors may take profits in fear of another sector sell-off. Next, which updates on Wednesday, is on Panmure’s buy list along with Marks & Spencer, JJB Sports, N Brown and Ted Baker.
Carphone Warehouse reported that the first Best Buy big-box stores have had an “excellent” reaction from shoppers but did not provide figures in its first-quarter update. Overall, the retailer generated like-for-like growth of 3.7% in the period.
UBS, advising buy, noted: “Retail like-for-likes benefited from higher average revenue per connection on customer demand for more expensive smartphones. Robust first-quarter gross margins should underpin our full-year forecast.”
Grocer Morrisons has bought vegetable supplier Simply Fresh Foods. The deal is expected to help Morrisons meet demand as it expands. Industry observers say the acquisition of suppliers by grocers may emerge as a trend as supermarkets seek efficiencies.
Entertainment retailer HMV refinanced its £240m revolving credit facility a year in advance of the expiry of its existing arrangement. Finance director Neil Bright said the deal “ensures the group is on a strong financial footing for the future”.
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