Ocado is expecting online boom to continue
Sales up 40pc as people ‘queue’ to get on its site
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 joint venture with Marks & Spencer delivered retail revenues of £599m for the 13 weeks to February 28, covering the Christmas trading season – up 40 per cent on a year earlier.
The value of its average order jumped from £110 a year earlier before the pandemic struck 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.
Tim Steiner, chief executive of Ocado Group, said: “Over the last 12 months there has been a dramatic and permanent shift towards online grocery shopping around the world.
“Millions of customers have experienced online grocery shopping through the pandemic and many of them will not be going back to bricks and mortar.”
He said even if there was some drop-off in online grocery shopping as UK restrictions eased, Ocado was set for further growth as there were “effectively customers queueing to come on to the Ocado site”.
The group said sales and earnings growth was set to ease as it came up against strong results from a year ago, when the coronavirus crisis hit.
However, it expected revenue growth in the second quarter amid ongoing Covid-19 restrictions and as it ramped up production at its new mini hi-tech warehouse in Bristol, which can process 30,000 orders a week.
Melanie Smith, Ocado Retail’s chief executive, said: “The second quarter represents the oneyear 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 yearon-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.”
The firm also revealed it was searching for at least 12 new micro sites to further the rollout of its Ocado Zoom service, which offers one-hour deliveries.
It was also “actively looking” for suitable sites to grow outside the capital.
Sophie Lund-Yates, equity analyst at Hargreaves Lansdown, said: “The pandemic provided a forceful tailwind for the online grocer and its 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. With capacity being ramped up, it’s important there’s enough demand to match. Ocado and M&S’ higherend
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.”
Ms Lund-Yates said the joint venture was also important for
M&S, which is trying to rejuvenate growth. “A slick food operation is a key pillar of this, while the outlook for clothing and home remains challenging.
“M&S’ involvement also means Ocado’s fortunes really rely on its solutions business, where it charges retailers to use its stateof-the-art, automated fulfilment centres.
“Looking at predicted sales, the share-price valuation is still some way above the 10-year average. Keeping the share price propped up will depend more on brokering new solutions partnerships and less on the retail business, which is more of a nice-tohave than a strategic lynch pin.”
Mr Steiner dismissed the recent launch of Amazon Fresh in the UK’s bricks and mortar grocery market as having a “negligible impact”.
Many customers will not be going back to bricks and mortar. Tim Steiner, chief executive of the Ocado Group.