Ocado boosted by high-spending M&S customers

Ocado has revealed a 40 per cent surge in retail sales amid a “dramatic and permanent” shift towards online shopping since the pandemic struck.

The group said its retail arm joint venture with Marks & Spencer delivered retail revenues of £599 million for the 13 weeks to February 28, covering the Christmas trading season – up 39.7 per cent on a year earlier.

The value of its average order jumped to £147, which it put down to a festive boost combined with the impact of the latest lockdown.

Ocado processed 329,000 orders a week, up 2.5 per cent on a year earlier. It said sales and earnings growth may ease as it comes up against strong results from a year ago, when the coronavirus crisis hit.

But it expects revenue growth in the second quarter amid ongoing Covid-19 restrictions and as it ramps up production at its new mini hi-tech warehouse in Bristol.

Melanie Smith, Ocado Retail’s chief executive, said: “The second quarter represents the one-year anniversary of the start of the Covid-19 pandemic which accelerated the demand for online grocery.

“While this year’s quarterly sales figures will reflect the year-on-year comparisons with periods of full lockdown, we expect strong growth over the coming years as we continue to lead the charge in changing the UK grocery landscape, for good.”

John Moore, senior investment manager at wealth management firm Brewin Dolphin, said: “Ocado Retail delivered a strong festive period and start to 2021, with revenues up 40 per cent on the same period last year.

“Whilst there is no doubt that online shopping has become more ingrained in our everyday lives, from here like-forlike growth comparisons for the company should start to moderate, as the initial lockdown-related spike in activity set a high bar.

“Looking past those shortterm comparisons, the company should benefit from the rewards of its investment in additionalcapacityandquicker, moreagilecustomerfulfilment over the next year or so. Its partnership with M&S shows how traditional retailers can quickly accelerate their digital fulfilment, which offers untapped international potential.

“Ocado Retail remains the stand-out technology company on the FTSE 100.”

Sophie Lund-yates, equity analyst at Hargreaves Lansdown, noted: “The pandemic provided a forceful tailwind for the online grocer, and its equal partner M&S. As we start the slow journey out of lockdown though, the hard work begins.

“Comparisons compared to this time last year when people were stockpiling will be a lot tougher. As such, retail revenue and profits are expected to grow at a slower rate. That’s to be expected, but Ocado’s banking on the pandemic having triggered a long-term increase in demand for online groceries.

“Withcapacitybeingramped up, it’s important there’s enough demand to match. Ocado and M&S’ higher-end proposition sets it apart from other online supermarket offerings, and having a unique selling point in the uber competitive grocery market should hold the group in good stead.

“Let’s not forget this is important for M&S too – which is in the middle of trying to rejuvenate growth.”