The shares of Ocado rocked following the warning that sales of groceries may land at a level below the expectations in 2022. The stock crashed 8.2 percent and this led to the wiping off 740 million pounds from its market value.
Along with the online supermarket, shares of Marks & Spencer simultaneously declined 2.6 percent as it is the half-owner of Ocado Retail, the grocery business of Ocado.
Meanwhile, Ocado has reworked its 2022 growth forecast and reduced it by about 10 percent due to rising prices amid the Russian invasion of Ukraine. It warned the profit margin may be slightly low this year as energy costs have increased.
Ocado added it is not easy to predict the inflation of food prices accurately and uncertainty is prevailing since the conflict between Russia and Ukraine started on February 24. The demand may decrease as shoppers are facing a crisis in their cost of living due to a rise in both energy bills and taxes.
The company said shopping patterns are now returning to the level of pre-COVID and the basket size is smaller by just 15 percent compared to the same time in 2021.
The customer base has grown up, but the return to restaurant eating and working in offices has not been recovered completely. A sales slump of 5.7 percent is being witnessed now compared to the same time in 2021.
Ocado said it is the first time that the sign of sales stalling has been witnessed. During the COVID-19 pandemic period, people were forced to stay indoors and this increased the size of online sales.
The shares jumped up too high in September 2020 but soon suffered a dip when the lockdowns were lifted and COVID restrictions were eased.
About Ocado Group
The Ocado Group was founded in April 2000 by Jonathan Faiman, Jason Gissing and Tim Steiner. It is headquartered in Hertfordshire, UK. It has licensed grocery technology and owns half of the total shares in Ocado.com. The other half is owned by Marks & Spencer.
The primary products of Ocado include groceries of own brand from Waitrose supermarket chain. Later, it struck a joint venture deal with Marks and Spencer.
Most technology of Ocado has been designed in-house including apps, websites, robots and automated warehouses. It is capable of detecting fraud with the help of machine learning software and can forecast the market.
Its warehouses are equipped with a giant grid structure to store groceries. The robots help in moving the crates and AI is used to control the central system. Moreover, the company is capable of picking about fifty items' in just a couple of minutes.