Equity Briefing: Sainsbury’s, Ocado and Purplebricks
Joshua Warner July 6, 2021 1:16 AM
Sainsbury’s releases a first-quarter update this morning, Ocado publishes interim results and Purplebricks is scheduled to report full-year earnings.
Sainsbury’s will release a first-quarter trading update this morning. These updates only focus on sales growth and don’t usually provide hard revenue figures.
The latest data from Kantar suggest Sainsbury’s delivered 10.2% sales growth over the 12 weeks to June 14, reported to be driven by its strong online offering and its convenience stores and giving an idea of how it performed. Still, that trailed the 12.1% growth at Tesco and the 10.5% growth at Morrisons but was ahead of Asda’s mild 6.3% rise in sales.
While evidence suggests that grocers have continued to benefit from strong growth even as restaurants, pubs and other venues have reopened as lockdown eases, Sainsbury’s has warned it will be coming up against strong comparatives from last year when demand exploded as the pandemic erupted.
Investors should also watch for any adjustments made to the outlook. Sainsbury’s said earlier this year that it agreed with the consensus among analysts that it can deliver underlying pretax profit of around £620 million in the current financial year. That would compare to the £356 million delivered in the last financial year and the £586 million booked the prior year before the pandemic hit.
The update comes as interest In the UK supermarket sector heats up following the bidding war that has started for Morrisons. Having turned down a £5.5 billion offer from Clayton, Dublier & Rice last week, it has now accepted a £6.3 billion offer from a rival consortium of investors, who are keen to tap-into Morrison’s large freehold property estate and supply chain that sees it make more of its own food compared to its rivals. With another private equity group, Apollo, also stating that it could be the third firm to make an offer for Morrisons, there are signs that the strong appetite for the sector could look at other players in the market if they are unable to snap-up Morrisons.
Meanwhile, Ocado will release interim results today covering the six months to the end of May.
The latest data on the grocery sector from Kantar suggested Ocado currently has its highest-ever share of the market at around 1.7%, driven by ‘industry-high sales growth’ of 42.2% in the 12 weeks to June 14. For comparison, its larger peers Tesco, Sainsbury’s and Morrisons delivered growth of around 10% to 12% in the period.
Kantar said the industry-leading growth was down to the continued boom in online grocery shopping, which plays into Ocado’s hands as the only online-only grocer. It is thought around one-in-five Brits are now ordering online even as lockdown eases.
The consensus among analysts, according to Bloomberg, is for revenue in the first half to rise to £1.84 billion from £1.08 billion the year before, and for Ebitda to jump to £65.7 million from £19.8 million.
Still, the question hanging over Ocado is whether Brits will maintain their appetite for online grocery shopping as lockdown eases. While its rivals have store sales to fall back on should there be any drop in online orders, Ocado does not enjoy the same level of resilience. Investors will be closely watching the growth figures between the first and second quarters for signs of a slowdown.
Importantly, the results in the second quarter will be impacted by strong comparatives from the year before when demand initially exploded when the pandemic erupted. So, whilst its retail unit, the grocery arm working with Marks & Spencer, delivered just under 40% growth in the 13 weeks to the end of February 2021 when the country was still in lockdown, it will struggle to deliver that level of growth in the second quarter when it comes up against tougher figures. Still, Ocado has said revenue will be higher in the second quarter than the year before.
Purplebricks will publish full-year results this morning.
The online estate agent has already revealed that it delivered a ‘strong performance’ that saw instructions rise 12% to 60,238 from only 53,680 the year before. It said trading was ahead of expectations in the second half, which investors hope can set the stage for the new financial year too.
The company said annual adjusted Ebitda should come in line with expectations. The current consensus among analysts is that annual revenue will fall to £88 million from £111.1 million and that adjusted Ebitda will rise to £2.6 million from £1.8 million.
Revenue was hurt by the initial disruption caused by the pandemic, but the trend is moving in the right direction, especially after the market was buoyed by the extension to the Stamp Duty holiday as well as the introduction of lower-deposit margins. Investors will be keen to learn how it has performed in the initial weeks of the new financial year, especially now some incentives like the Stamp Duty holiday have expired.
How to trade top stocks
You can trade a variety of stocks with Forex.com by following these four steps:
- Open a Forex.com account, or log-in if you’re already a customer.
- Search for the company you want to trade in our award-winning platform
- Choose your position and size, and your stop and limit levels
- Place the trade
Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.