Ocado enjoys sales growth but warns of another knock from expansion plans

ONLINE SUPERMARKET Ocado has cheered another strong quarter as it reported a pick-up in sales growth, but signalled a further hit from expansion plans.

The group posted a 13 per cent rise in retail revenues to £312.7m for its third quarter to August 27, up from 12.5 per cent in the first half of its financial year. Including earnings from its tie-up with Morrisons, group revenues rose 14.3 per cent to £344.5m.

But shares in Ocado fell as the group signalled another knock to earnings from costs of setting up new distribution centres.

It is increasing the capacity at its new centre in Andover, while also working on its fourth and biggest centre in Dartford, which is set to open next year.

Tim Steiner, chief executive at Ocado, said: “While increasing some costs in the short term, this will allow us to meet the rapidly growing demand for our services from UK consumers while allowing us to offer the very latest technology to current and future customers of our Ocado Smart Platform.”

Ocado’s update came as industry supermarket share figures from Kantar Worldpanel showed that Ocado is now reaching more shoppers nationwide than ever before, with 834,000 households shopping with the retailer in the 12 weeks to September 10.

The group notched up a 16 per cent rise in average orders a week to 254,000, although it said the average basket size fell by 1.2 per cent to £106.25, but this was an improvement on the 1.4 per cent fall seen at the half-year stage.

It has previously said that customers are buying fewer items, preferring to shop more frequently.

Analysts at Bernstein said earnings expectations would need to be trimmed for Ocado, given the guidance on costs of the new depots.

They said: “The market underestimates the margin impact of setting up the new facilities.

“In our view, profit expectations for 2018 and beyond will need to come down further.”