Ocado first-quarter retail sales rose but concerns grow around its partnership with Morrisons. This is what the analysts said.

“While Ocado expects to continue growing ahead of the fast-growing online grocery market, it is facing a new threat from online giant Amazon, which recently struck a supply deal with Morrisons, to sell a selection of the supermarket’s food ranges via its website.

“This provides a direct threat to Ocado, potentially limiting its scope for growth with Morrisons if the relationship develops.

“Even more significant though is the risk that Morrisons, and indeed other grocers, may look to partner with Amazon instead of itself.

“This will potentially undermine the future potential of its contract with Morrisons as well as any other prospective retailers.

“It is therefore vital that Ocado seals a technology partnership with another retailer promptly to showcase the strengths of its offer and prove to investors that its Smart platform is scalable.” – Duygu Hardman, Verdict Retail


“Ocado Group Plc reported 15% revenue growth driven by an increase in orders of nearly 17% during the first quarter ended 21 February 2016.

“The strong performance could not come at a better time.

“Ocado’s share price has come under mounting pressure on several fronts. British grocery price wars have piled pressure on the pureplay online grocer as an increasing number of consumers look for value.

“Morrisons, Ocado’s once strategic partner, has announced a new tie-up with Amazon, casting doubt on the long-term growth prospects and profitability of the Morrisons partnership.

“Investors are also losing patience with Lord Rose and Tim Steiner’s promises to diversify into international markets and sign retailers up to the Ocado Smart Platform business-to-business software solution.

“Ocado’s newly restructured management team will be looking to convince investors that their strategy can stand up to higher levels of competition in the near future.” – Ray Gaul, Kantar Retail


“It is encouraging that the growth in average orders per week accelerated again in the quarter leading to a small step-up in the retail gross sales, while the contribution from Morrisons’ agreement continued to be helpful too.

“However, if the recent deteriorating trends seen in the net debt position continue, it could become slightly worrying for some.

“The lack of international deals may discourage some – even if not surprising as the materiality of any deal means that it would have to be announced as soon as signed.” – James Anstead, Barclays


“Ocado‎ has delivered a sound first-quarter update to our minds, albeit a continuation of more mellow trading momentum.

“This reflects deflation and the competitive environment but also the group’s inability to grow its trolley.

“We see the negotiations with Morrisons as being critical to Ocado’s future.

“While we anticipate less favourable commercial and strategic terms with Morrisons, why would Morrisons accept anything else? Such an agreement could unlock wider opportunities for the group and so potentially allow it to make a more satisfactory return on the highly capitalised development costs.” – Clive Black, Shore Capital


“First-quarter retail sales growth, while marginally ahead of consensus, has come in largely as expected, and continues to be driven by strong order growth, somewhat offset by price deflation.

“For our part, we continue to believe that central fulfilment is the best model and that Ocado has the leading global solution.

“While the lack of deal announcement and broader investor concerns around competition have weighed on the shares, we retain our positive stance.

“In all, a solid trading update with no surprises, and we leave our forecasts unchanged.” – Andrew Wade, Numis