Ocado and M&S venture cuts growth targets

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26th May 2022

Bite-sized business news from the UK and beyond
Good morning “Who cares if Miami is six metres underwater in 100 years?” Not Stuart Kirk. HSBC’s head of responsible investing gave a presentation called, “Why investors need not worry about climate risk” at a conference last week, where he accused governments of hyping up climate change as an existential crisis that he believes it isn’t. Unsurprisingly HSBC’s execs said that Kirk’s statements did not align with HSBC’s strategy and he’s reportedly been suspended.
Today's stories
  • Oca-no – Ocado and M&S venture cuts growth targets 
  • Monkey business – Countries start shopping for monkeypox vaccines 
Ocado and M&S venture cuts growth targets

What happened?
Yesterday Ocado announced that revenue and profits from its 50/50 joint venture with Marks & Spencer, called Ocado Retail, would be lower than expected driven by growing pressure on consumer wallets. 

Sales are now expected to grow in the low single digits, rather than 10% while its core earnings margin would be in the low single digits. 

Trading performance has deteriorated in the past few months
Ocado’s sales dropped by 8% in the quarter to 25 April, against a 6% fall in the previous quarter. The company says that customers are buying fewer items as household budgets are squeezed by rising energy bills and general inflation.

The partnership with M&S started at a prime time for online grocery shopping
Ocado Retail was created in September 2020 when Ocado ditched selling Waitrose products after 20 years, in favour of a deal with M&S.

Online grocery sales boomed during Covid as consumers looked to avoid the crowds in physical supermarkets. 

Today the online grocery market is 50% larger than before the pandemic and the proportion of food shopping done online is 12%, almost double compared to 2019 levels. 

But as restrictions have eased, consumers have started returning to shopping in stores. So far this year the online grocery market has declined 20% compared to 2021. 

Ocado’s shares have fallen out of favour with investors     
Shares have been on the slide since the start of the year and are down 52% year-to-date and about 75% from the all-time highs in January 2021. Following the news of the revenue and profit slowdown shares fell another 4% on the day.
Other stories to keep you in the loop
  • Rishi Sunak to outline cost of living help on Thursday
  • Energy firm SSE announces £1.5bn operating profit
  • M&S pulls out of Russia and warns of hit to sales due to cost of living crisis
  • Pfizer will not sell drugs for profit in poor nations
  • Pets at Home profits rise over 60% but warns on cost pressures
  • Founder and CEO at beauty giant Glossier steps down
  • JD Sports boss quits after £4.3m fine
Countries start shopping for monkeypox vaccines

What happened?
Monkeypox has become the latest health headline just as Covid-19 appears to be in the rear-view mirror.

At least 17 countries — including the UK, US, France and Australia — have reported monkeypox cases this year. As of Saturday, the WHO confirmed 92 cases of the virus, which is usually mild and associated with fever and bumpy rashes. 

This has led to dozens of countries entering the market for monkeypox vaccines.

But there is no monkeypox-specific vaccine
According to the World Health Organization, Imvanex — originally developed for smallpox — has proven 85% effective at preventing the disease because the two viruses are so similar.

The vaccine is made by Denmark-based Bavarian Nordic. The UK had 5,000 doses before the current outbreak with 20,000 more being ordered.

Bavarian Nordic has seen a surge in business and its share price
Germany, which has reported five cases of monkeypox, said Tuesday it was ordering 40,000 doses of Imvanex as a precaution. “We feel confident based on discussions that we’ll be able to meet the demand in a relatively short period of time,” Paul Chaplin, Bavarian Nordic’s CEO, told The Wall Street Journal, adding that dozens of countries have inquired about orders.

Bavarian Nordic's stock is up 17% in the past month, likely due to the wave of news about the virus. So far this year, however, it's down 35% — pretty much in line with the broader biotech sector.

The US leads the way in stockpiling
As part of its strategic-defence reserve against biological attacks, the US has access to 1.4m doses of the jab and another 100m doses of ACAM2000, a similar vaccine that officials say could be used to prevent monkeypox.

The bottom line
Health officials said that while the outbreak is “significant and concerning”, the risk to the UK population remains low. The World Health Organization says the outbreak is "containable" and it is providing advice to countries on how to tackle the situation.
Stat of the day

There are an estimated 390m guns in circulation in the US, more than one per person
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