BUSINESS LIVE: BoE rate decision looms; Next targets £1bn profit; Ocado Retail targets double-digit growth

Ocado Group has raised its full-year profit forecast after its joint venture with Marks & Spencer was boosted by a rise in customer numbers.

Ocado Retail saw sales rise more than 15 per cent to £658m in the 13 weeks to September, compared with £569m in the same period a year ago. The number of active customers rose 10.3 per cent to more than one million.

It marks a recovery from weaker trading during a post-pandemic slump, with Ocado Retail facing a surge in customers returning to physical supermarkets.

The Bank of England plays down the idea that US interest rate policy has direct consequences for our own policies.

It is argued that UK inflation has been largely caused by supply problems following the pandemic and Russian aggression in Ukraine.

The US central bank announced a major interest rate cut of half a percentage point last night in an attempt to achieve a “soft landing” for the world’s largest economy.

It was the first rate cut by the US Federal Reserve in four years and sent the dollar falling against the pound, which stood just below $1.33, its highest level in two and a half years.

John Moore, Senior Investment Manager at RBC Brewin Dolphin:

‘Ocado Retail is starting to deliver, after a bumpy period for the business. Strong sales, volume and customer growth suggest the joint venture strategy is delivering results, and Ocado Retail guidance has been raised accordingly.

‘For the wider Ocado Group, this should be the next step on the road to £3bn in revenue, growing EBITDA and self-sustaining growth without having to borrow more or raise equity. The last nine months have been challenging for the business, with shares down more than 50% year to date and almost 75% compared to five years ago. To turn that around, the business’s growth will need to translate into profitability.’

Aarin Chiekrie, equity analyst at Hargreaves Lansdown:

‘Next has been delivering a good run of positive news recently and today’s results did not disappoint investors. Just six weeks after its last upgrade, Next has again issued an improved profit forecast as sales for the half-year came in ahead of previous expectations.

‘The sky-high demand in the online channel remains a recurring theme. Despite already accounting for more than half of the group’s turnover, the online channel is still seen as the main growth engine. The expansion abroad is still in its early stages and if Next can execute its strategy well, there is still a lot of room to grow.

‘Retail is a different story, with sales down 2.1% in the first half. That trend is not expected to change as high street shopping is in structural decline. Next has some insulation in that its stores tend to have shorter, more favourable leases than peers, and are more focused on out-of-town outlets that have performed better.

‘Full-price sales continue their upward trend. Delivering what fashion-conscious consumers want at the right price is exactly what helps Next remain profitable at the top of its peer group. Overall performance has been good and the current valuation does not fully reflect the growth opportunities available. But expanding abroad is not easy, as many of its peers have discovered the hard way, meaning there could be some ups and downs along the way.’

Ocado Retail expects to post double-digit revenue growth this year after sales rose 15.5 percent in the most recent trading quarter, thanks to a focus on added value and attracting more customers.

The company, a joint venture between Ocado Group and Marks & Spencer, said it now expects annual sales to grow in the low double digits, up from its previous forecast of mid to high single digits.

The company expected core profit margin to be around 2.5 percent, unchanged from previous guidance.

Rolls-Royce’s nuclear ambitions received a major boost last night when the company secured a major contract.

The British engineering giant has been selected to build mini nuclear power plants for the Czech government.

Rolls-Royce beat off competition from French, American and Japanese rivals to be named preferred supplier to state energy group CEZ.

Concerns over the future of British Steel are growing after the Chinese company announced losses had risen to more than £400m.

The company said losses in 2022 rose eightfold, from £49.5m to £408.4m, in the latest blow to the UK steel industry.

Next expects to make annual profits of almost £1bn after the retail giant raised its outlook for the second time in two months following better-than-expected recent trading.

The group, often seen as a good barometer of how British consumers are faring, reported a 7.1 percent rise in pre-tax profits in the first half of July. It also said full-price sales in the first six weeks of the second half “significantly exceeded” expectations, rising 6.9 percent.

As a result, Next raised its forecast for second-half revenue growth to 3.7 percent, up from the previous forecast of 2.5 percent.

The company now also expects pre-tax profit of £995m for the full 2024/25 financial year, up from its previous forecast of £980m and up 8.4 per cent on 2023/24.