Panmure Gordon continues to label grocery group Ocado as a 'sell', saying that company is still underperforming expectations and its multi-channel competitors.

The company said on Tuesday morning that gross sales for the six weeks to January 6th were up 14.2% year-on-year at £91.6m, which Panmure labels as "modest" relative to its peers - recently announced online food growth at Sainsbury, Tesco and Waitrose was 15%, 18% and 37%, respectively.

Panmure said: "Ocado needed a fundraising last year in order to avoid a breach of its covenants, but this means that it has the funds to trade for some time. However, that does not mean that the model is suddenly a good one.

"Sales continue to underperform both City expectations and its multichannel competitors."

The broker said that while 'Click & Collect" will gain momentum in online food retailing, Ocado will be unable to deliver on this.

"Much depends upon February's launch of CFC2 [distribution centre] going to plan, but we think that there is a lot that can go wrong."

As for the bid rumours regarding Morrison - Morrison is thought to be interested in the firm to kick-start its online food business - Panmure said that it is unlikely at current prices that the supermarket would launch a bid for Ocado.

"Ocado's market capitalisation is £487m and its enterprise value is £603m. On top of this, Morrison would have to pay a £40m break clause to Waitrose. We don't think that an investment of this scale would make much sense to Morrison shareholders."

The broker has retained its 50p target price for Ocado.

BC

Related share prices
Morrison (Wm) Supermarkets (MRW) share price
Ocado Group (OCDO) share price