Summertime blues for Moss Bros and Ocado

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CELEBRATIONS to mark the Diamond Jubilee and the London Olympics hit summer sales at both suit specialist Moss Bros and online supermarket Ocado as shoppers put away their wallets and watched the action.

Moss Bros said it missed out on nearly £2m of hire business in its half-year results as couples deferred their weddings until after the events.

Ocado said sales growth slowed in its third quarter, rising 9.9 per cent to £162.6m in the 12 weeks to August 5.

That compares with a first half rise of 12 per cent.

Moss Bros expects to recoup the lost income in the current period, but in the meantime it reported like-for-like profits of £2.2m for the six months to July 28, unchanged on a year earlier.

Moss said it also absorbed increases in raw material prices in the period, but that margins are now showing an improving trend as a result of a recent stabilisation in input costs.

Early indications from four stores that were refurbished during the first half have been encouraging and a further 12 outlets are due to be refitted in the second half as part of a drive targeting 90 sites over five years.

Moss said trading in the seven weeks to September 15 has been encouraging, albeit with slower like-for-like sales growth than the 5.7 per cent rise seen in the first half.

Chief executive Brian Brick said: “These results reflect another period of progress for the company.

“The group has traded well across both hire and retail in the first six months of the year.”

Moss recently sold its Cecil Gee and Hugo Boss stores in order to focus on improving its core business.

Ocado, whose range includes products supplied by upmarket grocer Waitrose, suffered a string of profit downgrades last year.

The group warned in June that the Jubilee events had had an impact on trading, but said it still expected sales growth in the second half overall and added that it anticipated an increase in the rate of sales growth in the fourth quarter.

Ocado shares have had a rollercoaster ride since floating at 180p in July 2010.

They hit a low of 52p last December but rose to a 12-month high of 134p in March as hopes were raised it had got to grips with bottlenecks at its distribution centre at Hatfield.

June’s update prompted another reversal and some analysts have raised concerns that Ocado could breach its banking covenants.

Ocado, founded in 2000 by three former Goldman Sachs bankers, has polarised opinion like few other market debutants.

Fans point to rapid growth in online grocery sales and to its high customer service ratings, but sceptics think its model of filling orders from a central depot will never be as profitable as online operations at established grocers, which mostly pick orders in store.

Analyst Philip Dorgan, at Panmure, said: “The third quarter has seen sales growth decelerate, rather than accelerate as expected and this means that it is possible that Ocado could breach its net debt to EBITDA covenant this year.

“Ocado expects the fourth quarter to see sales growth accelerate, but then they would, wouldn’t they?

“We remain sellers with a target price of 50p because, although we now believe that Ocado’s days as a public company are limited, we don’t think that the equity is worth very much.”