Ocado Retail Third-Quarter Statement – What The Analysts Said

By Steve Wynne-Jones
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Ocado Retail Third-Quarter Statement – What The Analysts Said

Ocado Retail, the newly-formed joint venture between Ocado and Marks & Spencer, has posted 11.4% growth in retail revenue in the third quarter of its financial year, to £386.3 million (€435.2 million).

Commenting on its performance, Melanie Smith, the group's chief executive, said, "As we continue to enhance our offering and add more capacity in the UK, our leading partnership will deliver the very best experience to an ever-growing number of customers."

Here's how leading retail analysts saw it:

Fiona Cincotta,

"Ocado has reported steady growth in sales over the third quarter but it hasn't exactly shot the lights out. Growth of 11.4% is at the lower end of the company's 10-15% guidance range for the full year and is perhaps not surprising in the wake of the big fire at Andover and smaller one at Erith.

"This update only takes about a month of the M&S deal into account, so it' s hard to get a good read through on how well the transaction is playing out for both parties. Order sizes are down but that appears to have more to do with people ordering more frequently than it does to them trimming their overall spend.


"There remains a real risk that loyal customers of former Ocado supplier Waitrose will refuse to make the switch to M&S. We'll get a greater sense of whether Ocado is successfully acquiring enough new customers to take up the slack when it releases results for the fourth quarter."

Steve Miley,

"Compared with the same quarter last year, revenue recorded 11.4% growth, taking the revenue for the period to £386.3 million. Average orders per week have recorded a 12.1%% increase compared with last year, which is encouraging considering that the group operations had been impacted by the fire at the CFC3 warehouse in Andover in spring. The average order size thought has declined to almost 1% compared with the similar period last year.

"This was the first set of results from the joint venture between Ocado Group and M&S. The deal signed in February to create a joint venture that will facilitate online delivery for M&S products is still in the implementation phase, with a deadline set for September 2020. On the back of the deal, Ocado has received £562.5 million.

This deal that will allow consumer to buy M&S products online, implies that Ocado will have to move away from Waitrose, a partner since launch, which will also test consumer loyalty to the Ocado brand. The cash infusion received on the back of M&S deal will further help the company in the transformation towards a retail technology provider."


Barclays European Food Retail Equity Research

"Growth accelerated to 11.4% (vs c8.1% in 2Q), within the 10-15% 2H sales guidance. 3Q retail revenue grew by 11.4% to £386.3m, versus Barclays forecast of 10%. Average orders per week rose by 12.1% to 314,000, versus Barclays 10.5%.

"Ocado Retail expects 10-15% growth for 4Q, even though it is a busier quarter than 3Q (and therefore capacity might come under greater pressure). Ocado did not get the same sales boost from weather/World Cup in 2018 that bricks and mortar stores did – but consequently did not face such tough comps over summer 2019. Average order size fell by -0.8%, impacted by customers making more frequent orders."

Business preparing to launch the M&S range from September 2020. JV is working to identify any gaps in the M&S range to make sure that these can be addressed before switchover in September 2020. Need to do some work on bigger pack sizes, more organics."

© 2019 European Supermarket Magazine – your source for the latest retail news. Article by Stephen Wynne-Jones. Click subscribe to sign up to ESM: The European Supermarket Magazine.

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