The Week Ahead: Figures due from Sports Direct and Ocado
- Credit: PA
Scandal-hit retailer Sports Direct and online grocer Ocado are set to update the City on trading this week as the fall in sterling and the supermarket price war continue to dominate.
Mike Ashley’s Sports Direct is expected to lay bare the impact of the fall in the value of the pound when it reports half year results on Thursday, with the retailer forecast to take a significant hit.
The group, which has endured a long list of controversies over recent months, compounded its PR problems by failing to hedge against the fall in sterling in the immediate aftermath of the referendum.
The company said in October that full year earnings were expected to come in at £285m, compared with the £300m it had originally pencilled in.
Andrew Wade, analyst at Numis, said: “Wary of the extent to which Sports Direct is being required to change commercially as the major brands demand a better showcase, and notwithstanding some potential gross margin upside in full year 2018 for the business as the brands re-price ranges following recent sterling weakness, we see limited scope for a material profit recovery in the next few years .”
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This week’s results come after a string of controversies for the firm which has seen billionaire Mr Ashley grilled by MPs over working conditions, chief executive Dave Forsey quit – to be replaced by Mr Ashley – and Sports Direct bosses insist they had no knowledge of a recording device which a group of MPs said they found during an unannounced visit.
And just last week, the Financial Reporting Council announced that it is investigating Sports Direct over an undeclared relationship with a firm owned by Mr Ashley’s brother.
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Also on Thursday, online grocer Ocado will update the market on trading in its fourth quarter amid a backdrop of a supermarket price war the looming threat of AmazonFresh.
City analysts expect another solid period following a third quarter which saw a 15.4% rise in gross sales to £314m, with retail sales up 13.6% at £286.4m.
Andrew Wade, analyst at Numis, said: “Looking ahead to the fourth quarter, we expect similar trends to play out, with strong order growth but basket size continuing to decline, and look for retail sales growth of plus-13%.”
In a sign of the toll taken by the ongoing price war, Ocado revealed in September that its average order size was down 3.4% at £107.94.
The price war, sparked by the rise of discounters Aldi and Lidl, has engulfed the sector and has seen all of the so-called Big Four supermarkets – Tesco, Sainsbury’s, Asda and Morrisons – come under pressure.
Ocado has not been immune, and chief executive Tim Steiner cautioned over the group’s profit margins in the last trading update.