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Ocado Slumps as Olympics Adds to Summer of Disruption in London

June 26 (Bloomberg) -- Ocado Group Plc shares fell the most ever after the U.K.’s largest online grocer said business this summer may be disrupted by the London Olympics as people alter shopping habits and traffic restrictions hamper deliveries.

The games, which run from July 27 to Aug. 12, will be “poor for large out-of-town stores and the Internet,” Chief Executive Officer Tim Steiner said in a telephone interview today. It’s difficult to predict whether customers will leave town, stick to convenience stores or order online, he said.

Ocado fell as much as 18 percent in London after the Hatfield, England-based company said both the grocery market and the economic climate “remain challenging and uncertain.” The company’s profit growth was restricted in the first half after it joined a coupon battle with store-based competitors.

Summer events in London “could be having an impact on the group’s ability to execute and may result in a hit to performance near-term,” James Grzinic, an analyst at Jefferies International, said in a note to clients.

Events held this month to celebrate Queen Elizabeth II’s Diamond Jubilee caused “some disruption” to Ocado, which has most of its customers in London and southeast England. There is “uncertainty” as to the effect of the Olympics, it said.

Ocado dropped 16 percent to 90.95 pence as of 10:57 a.m. The shares have still risen 67 percent this year, the seventh-best performer in the U.K. FTSE 350 Index.

‘More Uncertain’

Steiner said he can’t be confident that sales will be increasing at a pace of 18 percent to 20 percent by the end of the year, reining in earlier prediction that sales growth will approach 20 percent by the year-end.

“It’s difficult to say right now, the world becomes more uncertain every day,” the CEO said. “The economy and consumer confidence is lower than it was three to four months ago.”

Pretax profit at Ocado rose to 181,000 pounds ($282,180) in the 24 weeks ended May 13, from 174,000 pounds a year earlier. Earnings before interest, tax, depreciation and amortization rose 4.5 percent to 14.9 million pounds, missing the 15.1 million-pound average estimate of three analysts.

The retailer increased spending on marketing coupons to defend against similar activity by the biggest supermarkets including Tesco Plc and J Sainsbury Plc. Revenue at the online grocer rose by 11 percent to 308 million pounds, and Ocado said it expects growth to accelerate in the second half as it increases capacity at its Hatfield distribution center.

Duncan Tatton-Brown, the former chief financial officer of Fitness First Group Plc, will join the board as new CFO from Sept. 1 replacing Andrew Bracey who left in March. Tatton-Brown was formerly finance director of Kingfisher Plc.

To contact the reporter on this story: Sarah Shannon in London at sshannon4@bloomberg.net.

To contact the editor responsible for this story: Celeste Perri at cperri@bloomberg.net

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