* Seeing sustained and continuing margin pressure
* Analysts trim full-year earnings forecasts
* Q3 retail sales up 13.6 pct
* Still expects to sign multiple licensing deals
* Shares fall as much as 14.6 pct
(Adds detail, CFO, analyst comment, shares)
By James Davey
LONDON, Sept 13 A prolonged fall in grocery
prices is pressuring profit margins at British online
supermarket Ocado and cut-throat competition shows no
sign of letting up, it said on Tuesday, triggering a slide in
Ocado stock, which has had a rollercoaster ride since its
market debut in 2010, had risen 11 percent over the last month
after the firm sealed a new distribution deal with Morrisons
, Britain's No. 4 supermarket.
Those gains were wiped out on Tuesday, however, as analysts
trimmed their earnings forecasts.
The stock was down 14.6 percent at 275 pence by 0846 GMT,
valuing the business at 1.72 billion pounds ($2.3 billion).
"As the market remains very competitive, we are seeing
sustained and continuing margin pressure and there is nothing to
suggest that this will change in the short term," said Chief
Executive Tim Steiner.
Finance chief Duncan Tatton-Brown explained Ocado's policy
was to follow the major players in the grocery market, including
market leader Tesco, on price.
"Therefore when market prices are down our prices are down,"
But he still expected Ocado's sales to grow ahead of the
online grocery market, and substantially ahead of the market
Prior to Tuesday's update, analysts were on average
forecasting full-year core earnings of about 88 million pounds
($117 million), up from 81.5 million pounds in 2015.
Analysts at Numis, who have a 'buy' rating on the stock, cut
their forecast to 85.1 million pounds from 87.5 million -
"recognising that the industry-wide pricing pressure on basket
size is likely to weigh on gross margin."
Ocado, whose range includes products supplied by upmarket
supermarket Waitrose, said gross retail sales rose 13.6
percent to 286.4 million pounds in the 12 weeks to Aug. 7, its
fiscal third quarter. That compared with first-half growth of
Gross sales, which include the fees Ocado earns from
Morrisons, increased 15.4 percent to 314 million pounds.
Tatton-Brown highlighted a 19 percent increase in average
orders per week to 226,000 in the period, Ocado's best
performance in over five years, as evidence the launch of Amazon
Fresh in June had not hurt its business.
Analysts see winning international agreements with retailers
in north America and western Europe as the key influence on
Ocado's stock market valuation. However, the company missed its
target of securing a deal by the end of 2015 and is still to
"There's no change to our view on that," said Tatton-Brown.
"We're still confident that we'll sign multiple deals in the
($1 = 0.7508 pounds)
(Editing by Kate Holton and Mark Potter)