Important information: The value of investments and the income from them, can go down as well as up, so you may get back less than you invest.

At the very start of the pandemic, it was like all the supermarkets’ Christmases had come at once. The annual mega-festive blowout, which usually comes around about now, happened overnight, nine months early in March when we went into (the first) national lockdown.

It was good news on the face of it, for the supermarkets, who saw sales soar. But functionally they struggled to cope, as stockpiling shoppers snapped up every last available online delivery slot and filled their virtual trollies to bursting. And the same happened in-store, with queues around the block and shelves stripped bare once shoppers got inside.

Even Ocado (OCDO), the nation’s sole dedicated online supermarket had its own moments of meltdown; its website grinding to a virtual halt and delivery slots that had become scarcer than hen’s teeth, having to be ‘rationed’.

That was soon fixed though and for Ocado, the company once dubbed “the Microsoft of retailing”, just being up and running and then having the resource to scale-up at speed has meant Ocado’s Christmases will have probably all come at once in 2020. Especially if the pandemic has prompted a shift to online grocery shopping for good.

The UK company, which sells its technology to US-based Kroger and other supermarket groups, has said it expects earnings to come to about £60 million over the year to November. That’s some £20 million more than the previous guidance issued less than two months ago.

As for that shift from in-store to online shopping for good? Ocado chief executive Tim Steiner says it has happened, with trading at “peak volumes every day”.

The coronavirus crisis has turned Ocado into one of the top performers on the UK stock market. Its share price has more than doubled since March. Please remember past performance is not a reliable indicator of future returns.

Ocado isn’t resting on its laurels though. It has just agreed to buy San Francisco-based Kindred Systems, which develops artificial intelligence systems used to pick and pack online orders, for $262 million. Ocado also said it was paying $25 million for Haddington Dynamics, based in Las Vegas, which makes robotic arms.

Back on this side of the pond, investors will want to hear how the tie-up with Marks and Spencer is going when Ocado posts its fourth quarter trading update on Thursday.

Having now completed three whole months with M&S onboard, Ocado Retail, is expected to have turned in a strong performance in the final quarter of the year. The group expects the acquisitions to boost full-year revenues in 2021 by £30 million with a “small” negative hit to earnings.

The one potential blot on the Ocado landscape is the row that started to brew last month over patents. AutoStore, a Norwegian developer of warehouse automation systems, has accused Ocado of infringing robot technology patents. Ocado has denied the accusations and countered them with the suggestion that it was investigating whether AutoStore “has or intends to” infringe on its patents. Expect more on that in the weeks and months to come.

In the meantime, Ocado’s shares are currently trading around the £22 mark, having come back from their 12 month high of £29. But with a 78% boost to the share price since this time last year, and a couple more weeks of ‘traditional’ festive spending ahead, few investors are likely to be complaining.

The company will give a trading update on Thursday.

More on Ocado Group

Five year performance

(%)
As at 2 Dec

2015-2016 2016-2017 2017-2018 2018-2019 2019-2020
Ocado Group -30.9 38.4 128.7 47.6 78.1

Past performance is not a reliable indicator of future returns

Source: FE, total returns as at 2.12.20, in GBP terms

Important information: Reference to specific securities should not be construed as a recommendation to buy or sell these securities and is included for the purposes of illustration only. When you are thinking about investing in shares, it’s generally a good idea to consider holding them alongside other investments in a diversified portfolio of assets. Investors should note that the views expressed may no longer be current and may have already been acted upon. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to an authorised financial adviser.

Topics Covered:

UK; Shares

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