Ocado forecast a 13% uplift in sales for the second quarter today. The City welcomed the announcement but expressed concern over the etailer’s long-term future

In the face of the relatively underwhelming revenue growth, Ocado continues to press on with the development of its second Customer Fulfilment Centre (CFC) in Warwickshire, which is expected to commence trading in Q1 2013. We continue to struggle with this £200m+ development as Ocado has not yet demonstrated, after a decade of trading, that that CFC1 in Hatfield is a worthwhile economic proposition, with concerns that two CFCs are likely to further dilute the group’s economic performance. Ocado remains a distinctive and interesting business in our view, though it remains a business model distinctly unproven to our minds.

Darren Shirley, Shore Capital

This was in-line with our expectation and, as we understand, broadly in-line with consensus, continuing the steady rebuilding of growth that Ocado has targeted through 2012 as it works through capacity constraints in CFC1. Positively, the next major development in Hatfield, OSR2 (a piece of highly automated picking machinery), has started to go live in recent weeks. This gives clear visibility over capacity and efficiency benefits through H2, enabling the group to replace the low productivity trolley-picking operations, build range back towards 23,000 lines, and drive towards a capacity of 160,000 orders per week.

Andy Wade, Numis

Ocado seems to have left behind the issues that have besieged its Hatfield site, and so impinged its 2011 numbers, and its update represents a pleasing performance. Ocado continues to achieve greater efficiency at its main Hatfield distribution centre, and will benefit from the inevitable economies of scale improvements gained from its second distribution site, due to open in Warwickshire in 2013. However, significant question marks remain over the long-term potential for the Ocado model to achieve profitability. Moreover, in the shorter-term, the retailer will encounter an intensifying competitive environment, as its rivals continue to pour investment into pricing and promotions to drive market share.

Joseph Robinson, Conlumino

The shares have been weak ahead of today’s Ocado AGM update, but 13% sales growth over the last 12 weeks isn’t a disaster, given the bad weather, and the company says it is encouraged by progress so far this year and the “improving operational efficiency”. The bears, however, have a strong grip on this stock.

Nick Bubb, Independent