Ocado Group PLC's (LSE:OCDO) retail profit margins are expected to be under pressure when it updates on third-quarter performance on Tuesday, 19 September, a statement that usually wholly focuses on its 50-50 UK joint venture with Marks and Spencer Group PLC (LSE:MKS).
The quarterly results come with the shares still elevated from the six-year low seen in the early summer thanks to rumours of potential bid interest from Amazon, though there has been nothing from either company on this.
Thanks to that, the shares are no longer the most-shorted on the FTSE, as they were earlier in the year.
M&S meanwhile has seen its shares zoom 90% higher over the past 12 months, back above the pre-pandemic level and lifting the company back into the FTSE 100 after a four-year break.
There has also been some positive sales news in the latest industry updates from Kantar, where the Ocado Retail JV with M&S was shown to be increasing faster in August with growth at 4.3%, up from 1.4% and 2.0% in the previous two surveys.
This was likely to have been helped by the third round of price cuts since first launching reduction in June, in the hope that selling cheaper avocado, kale and Colgate toothpaste as loss-leaders will put it at an advantage compared to other supermarkets as the cost of food continues to rise.
In the second quarter the JV returned to profitability but these price cuts are not likely to be good news for profits, said analyst Sophie Lund-Yates at Hargreaves Lansdown.
“While Ocado is doing what it can, grocery inflation is rife, and customers are tightening their belts. Ocado isn't a discount name, making it tough to compete in the current environment.
“The group's still just about able to attract new customers, but people are buying less on average and the group's undertaking price cuts."
She said this will be “a painful development” for profit margins, though next week's announcement should give some further colour on how demand is shaping up.