Amazon rivalry plagues Ocado
Investors endured a torrid start to the year as concerns over the slowdown in China spooked financial markets around the world. But there was also trouble afoot at online grocer Ocado.
Its shares plunged 6.15pc, or 18.7p, to 285.4p – meaning the company has lost more than 16pc of its value in just four days of trading.
shareholders are still struggling to digest last week’s disappointing sales figures.
Concerns that the British firm will struggle to compete against Amazon are also weighing heavily on its share price
the Us behemoth, whose expanding empire spans book selling to film making, is gearing up to launch a fully-fledged grocery delivery service in the UK.
It already offers its ‘Pantry’ delivery service to subscribers of Amazon Prime.
Clive Black, head of research at shore Capital, believe Amazon could be ocado’s ‘nemesis’. But he reckons this is just one of a series of problems that the ‘market has not got out if its system’.
these include ‘long standing concerns about ocado’s relationship with Waitrose and Morrisons’.
Black predicts Waitrose will sever ties with ocado when its contract ends at the end of the decade.
And he believes its relationship with Morrisons (down 1.7p to 146.8p) is looking fragile after the recent change of management at the supermarket.
the failure of ocado to deliver on its promise to strike a deal with a big foreign supermarket has ‘undermined credibility of trust,’ according to Black.
After making its debut as a public company in 2010, ocado quickly became a darling of the stock market – widely praised for leading the way in home grocery deliveries.
But its detractors have long thought ocado to be overhyped and overvalued. Despite a market capitalisation of £1.7bn, the firm made its maiden full year profit in fifteen years – of £7.2m – in the year to november 30.
When the third best performing stock on the FTSE 100, BP, falls almost 2pc (down 6.45p to 347.55p), you know it has been a bad day.
the blue- chip index registered its worst start to the year since 2000 when the Dotcom bubble burst, closing down 148.89 points at 6093.43.
Markets fell across europe, with the German Dax down 4.3pc and the French Cac dropping 2.5pc.
In the Us the Dow Jones slipped 1.6pc. the rout was widely attributed to disappointing manufacturing data in China for December, marking the tenth consecutive month of contraction. But there are also fears that investors are about to start dumping stock.
to calm markets, Chinese authorities imposed a six month ban on institutional investors with big stakes in companies from offloading their shares.
this is being lifted on Friday. Crispin odey, one of the UK’s best known hedge fund managers, has warned that China may be forced to devalue its currency to boost growth.
this would drag down the price of Chinese exports, making it harder for other countries to compete. But other experts urged investors not to panic and insisted that the world’s second biggest economy remains a good long term bet.
Mark Dampier, head of investment research at pensions and savings giant Hargreaves Lansdown, said there are encouraging signs that the Chinese public are spending more – making the economy less reliant on exports:
‘People are far too gloomy about China. the domestic market is picking up, with private consumption growing by more than 10pc a year, and online shopping growing at 40pc a year.’ Dampier added: ‘China is a maturing economy which is going through a phase. It will pick up.’ Investors were not so optimistic. Mining stocks were among the hardest hit, with Anglo American down 7.2pc, or 21.6p, to 277.85p, and commodities trader Glencore falling 5.76pc, or 5.21p, to 85.27p.
China is the biggest buyer of commodities in the world, so evidence that its economy is struggling tends to drag down mining company shares.
Anglo/south African insurer Old Mutual dropped 6.43pc (11.5p) 167.4p. the firm, which was founded in Cape town but has its headquarters in London, is heavily exposed to the south African economy – which is reliant on exporting commodities such as iron ore and copper to China and elsewhere.
Luxury retailer Burberry, which has prospered from exporting handbags and trenchcoats to China’s rapidly expanding middle class, also fell 55p, or nearly 5pc, to 1.140p. ÷ ALDERMORE’S share price slipped 1.7p to 229.8p despite a thumbs up from Invesco’s Ian Gordon who reckons it is the most undervalued of all the banks. He believes its shares are really worth 325p. Others are not so confident. Barclays has sounded the alarm about proposals from European regulators to force smaller banks to hold more capital. This comes on top of a crackdown on buy-to-to let lending in the UK, which includes a 3pc stamp duty surcharge for landlords buying new homes.