The City kept up pressure on Ocado as it prepared for Wednesday’s float and, at the last moment, forced the online grocer to slash its asking price.
Ocado had hoped to win a valuation of close to £1.2bn. In the event it settled for £937m after accepting an IPO price of 180p rather than a hoped-for 275p.
Broker Arden said that was still an “astonishing” price and observed: “We know of many shrewd judges who will be looking to short the stock, as the centralised warehouse model and its cash demands remain controversial.” He noted, however, that other Ocado concerns, such as possible competition from Waitrose, had so far proved “red herrings”.
Bernstein believes grocers are past their low growth point for the year after studying Kantar data for the four weeks to July 11. The broker said: “We expect food inflation to pick up in coming months as higher food commodity costs pass through to food retail.” Tesco remains Bernstein’s preferred pick.
Collins Stewart pointed out that it was “another good month” for Marks & Spencer, “which grew ahead of the market for the third month in a row with sales growth of 4.8%”. The broker stuck to its hold stance on M&S, which is “fairly valued for now” pending new boss Marc Bolland’s strategic update in the autumn.
Halfords features on Execution Noble’s list of “investments for austerity”. The broker maintained: “Halfords’ blend of defensive and growth characteristics means
that we continue to see scope for absolute and relative share price outperformance.”
Buy Next, recommended Investec. The fashion group will update at the start of next month and Investec expects the numbers to come in at the top end of guidance and to show the advantages of its multichannel model. “The valuation discount to the sector average should narrow accordingly,” the broker said.
Weak trading in May prompted Blacks Leisure’s house broker Singer to double its forecast loss this year to £5m. “While adverse trading conditions have not been helpful, we believe that the controllable elements of the recovery plan are being managed very well but we adopt a prudent stance at this stage,” said Singer.
Numis welcomed Mothercare’s acquisition of a stake in its Australian franchisee and purchase of the Blooming Marvellous brand. Numis said: “While small in quantum, these types of deal are encouraging and are an excellent use of the cash building up on Mothercare’s balance sheet.”