Ocado plunges as discount retailers bite into margins

Shares in Ocado have plunged more than 13% after the online retailer warned that it was still bearing the scars of the supermarket price war.

The grocery deliveries firm has been hit hard like its rivals, from pricing battles being driven by discounters including Aldi and Lidl.

It also has to compete with Amazon which is muscling in on the online groceries market.

Tim Steiner, Ocado chief executive, said that the firm was “seeing sustained and continuing margin pressure and there is nothing to suggest that this will change in the short term”.

He revealed that the average customer order size dropped 3.4% to £107.94 in the third quarter.

Finance boss Duncan Tatton-Brown added: “Without a doubt there is price pressure and the market is finding it tough.”

The update did not impress the City, pushing the shares down 42p to 279p.

However, Steiner remained upbeat and he said that the group’s customer and technology focus “will allow us to grow ahead of the online grocery market, and substantially ahead of the market overall”.

Group sales rose 15.4% to £314 million in the period while the average number of orders per week jumped nearly 19% to 226,000.

Numis cut back its forecasts for full-year earnings for Ocado from £87.5 million to £85.1 million, as it recognises “the industry-wide pricing pressure on basket size”.

Meanwhile, house broker Goldman Sachs said margin pressure meant that underlying earnings were expected to come down by up to 2%.