Retail trading updates: Ocado thrives as JD Sports cuts profit forecast
Major UK retailers reveal contrasting fortunes as Ocado reports strong growth while JD Sports faces challenges amid weakening consumer demand.
Ocado delivers strong Christmas performance
Shares in Ocado have responded positively to impressive fourth quarter (Q4) results, with retail revenue jumping 17.5% to £715.8 million for the quarter ending 1 December, 2024. This success was primarily attributed to strong Marks & Spencer (M&S) product performance and effective customer acquisition strategies.
Key performance indicators include:
- 17% year-on-year (YoY) volume growth
- 16.9% increase in weekly orders
- 12.1% growth in active customers, reaching 1.12 million
- 20% rise in M&S product volume during the Christmas period
- 13.9% full-year retail revenue growth to £2.7 billion
- 11% intraday rise in the Ocado share price
CEO Hannah Gibson has highlighted the robust partnership with M&S, acknowledging ongoing discussions regarding a final payment dispute while emphasising the successful Christmas trading period and continued operational collaboration.
The Ocado share price, a favourite of short-sellers, rallied by around 11% to around the 300p mark following the company’s trading statement. It nonetheless remains within a medium-term downtrend.
Ocado share price daily candlestick chart
For this situation to change, a rise and daily chart close above the late November and early January highs at 329.3p-to-334.5p would need to occur.
JD Sports issues profit warning
JD Sports has issued a revised profit forecast, reflecting challenging market conditions in its key markets. The company has adjusted its pretax profit expectations to £915-935 million, representing a £40 million reduction from previous forecasts.
Significant developments include:
- Share price decline of 12% to a near five-year low
- 1.5% decrease in underlying revenue during November and December
- Reduced demand for Nike products, which represent 45% of retail sales
- Modest improvement in December trading compared to November
CEO Régis Schultz maintains a cautious outlook for the upcoming financial year. Industry analysts from Peel Hunt have endorsed JD's decision to maintain pricing integrity rather than engage in aggressive discounting, suggesting potential benefits from an anticipated Nike performance recovery.
Underlying revenue declined by 1.5% during November and December, with reduced demand for Nike products particularly impacting performance.
The sportswear retailer's share price tumbled 8% to reach a near five-year low following the announcement.
JD Sports share price monthly candlestick chart
The 200-month simple moving average (SMA) at 70.07 pence represents a possible medium-term downside target. It should remain in play while no bullish reversal takes the JD Sports share price to above its 104.30p January peak.
Market implications for investors
The contrasting performances highlight the divergent paths in UK retail, with online grocery continuing to show resilience while traditional retail faces headwinds.
Investors in UK retail shares should consider the broader implications of changing consumer behaviour and economic pressures.
The success of Ocado's digital-first approach suggests continued opportunities in the online retail space, something which is not yet reflected to a larger degree in its share price performance, though.
JD Sports' challenges reflect broader concerns about consumer spending and the impact on discretionary retail sectors.
Future outlook and strategic considerations
Ocado's growth trajectory appears sustainable, supported by strong customer acquisition and retention metrics.
JD Sports faces a more challenging path, with success dependent on navigating reduced demand for key brands and maintaining pricing discipline.
Both companies' performances will likely be influenced by broader economic conditions and consumer confidence levels.
Market observers should monitor upcoming trading updates for signs of changing retail trends and consumer behaviour.
How economic factors are shaping retail performance
The divergence in performance reflects the impact of inflation and interest rates on different retail segments.
It seems that essential grocery spending, particularly through online channels, has proved more resilient than discretionary purchases.
The FTSE 100 retail sector continues to face pressure from changing consumer preferences and economic uncertainty.
These trends could persist through 2025 as households still struggle with higher interest rate environment in the UK.
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