While Ocado Group PLC (LON:OCDO) is becoming a tech company, it is still very much intertwined in grocery retail and its first-quarter update on Thursday will show what effect the coronavirus is having after the company said last month it was experiencing “exceptionally high demand”.
“More people than usual seem to be placing particularly large orders,” the online grocer said in an email to customers. “As a result, delivery slots are selling out quicker than expected.”
For the medium and long-term, while an update on UK groceries and its joint venture with Marks and Spencer PLC (LON:MKS), the big picture for Ocado is all really about the delivery of its overseas Solutions contracts.
The FTSE 100 group is spending £600mln in capital expenditure this year, mostly on those client projects, and targeting retail revenue growth of 10-15%.
Analyst Bruno Monteyne at Bernstein said in a note this week that Ocado could be a “ten-bagger”, forecasting that the share of grocery sales that are made online could rise from the current 1.7% to at least 10% and perhaps even 40% as technology improves and delivery times shorten. He set a price target of 1,700p for now, but suggested the shares could be worth between 4,000p and 10,000p in ten years.
How's Next being impacted by coronavirus
Clothing retail powerhouse Next PLC (LON:NXT), which gave a solid update post-Christmas, is relatively well placed to cope with the coronavirus (COVID-19) impact, reckon analysts at Citigroup. The high street retailer's strong profit margins and a proportion of online sales of around 55% are “buffers to any EPS downgrades”, the analysts said.
“The highly cash generative business may see a postponement of its share buyback but there is no balance sheet risk.”
However, current trading and outlook will be the items to watch, with Citi expecting Next boss Simon Wolfson will lower his guidance for 2021 sales growth to flat from 3% and for pre-tax profit to £650-670mln from £734mln.
A cautious but perhaps prudent move in current circumstances might be to remove guidance, which analysts at Morgan Stanley said "could be taken badly not only for Next but also the wider retail sector" because of the company's bellwether status.
Gym Group investors sweat
Shares in The Gym Group PLC (LON:GYM) have been battered in recent weeks as the coronavirus causes investors to pull their cash out of operators in the leisure sector. Various health authorities around the world have mentioned gyms as a possible place where the virus can be spread due to the sharing of equipment in an enclosed area.
As a result, when the group delivers its full-year results on Thursday investors will be scrutinising the group’s comments about membership this year, as well as whether the outbreak had led it to alter or delay its expansion plans as the virus reduces demand for its gyms.
A trading update in January was upbeat so investors will be hoping as much of this momentum has been preserved as possible.
Significant events expected on Thursday 19 March:
Finals: Next PLC (LON:NXT), The Gym Group PLC (LON:GYM), Capital Drilling Ltd (LON:Ca APD), Hurricane Energy PLC (LON:HUR), Energean Oil & Gas PLC (LON:ENOG), Everyman Media Group PLC (LON:EMAN), Portmeirion Group PLC (LON:PMP), Safestyle UK PLC (LON:SFE), Sanne Group PLC (LON:SNN), Sportech plc (LON:SPO), TClarke PLC (LON:CTO), OneSavings Bank PLC (LON:OSB)
Trading announcements: Ocado Group PLC (LON:OCDO), IG Group Holdings PLC (LON:IGG), Halma PLC (LON:HLMA)
AGMs: Sunrise Resources PLC (LON:SRES), Impax Asset Management Group PLC (LON:IPX)
Ex-dividends to knock 1.09 points off the FTSE 100 index: SEGRO PLC (LON:SGRO), Meggitt PLC (LON:MGGT), Hikma Pharmaceuticals PLC (LON:HIK)
Economic data: US wekly jobless claims