Technology

Ocado Retail Reports 'Strong Momentum' Going Into New Year

By Steve Wynne-Jones
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Online retailer Ocado Retail has reported an increase in fourth quarter sales, as well as a 'record' Christmas period that provides it with 'strong momentum' as it enters a new year.

The business, which is a 50:50 joint venture between Ocado Group and Marks & Spencer, reported a 0.3% rise in sales in the fourth quarter, while sales were up 15% over the five days before Christmas.

Full-year revenue was down 3.8% from the previous year, at £2.2 billion (€2.48 billion). This was up around 40% on full-year 2019, the group said.

Current headwinds related to 'inflationary costs, capacity investments to support future growth and higher marketing costs' continue to weigh on profitability, the group said.

'Biggest-Ever Christmas'

"This year we delivered our biggest ever Christmas for our customers at Ocado," commented Hannah Gibson, Ocado Retail chief executive. "We now have close to 1m active customers, our largest ever customer base, and we see huge potential to convert those who have now trialled online shopping elsewhere to become Ocado customers."

Ocado Retail continues to grow its share of online grocery in the UK, increasing to 12.3% by the end of the quarter according to Nielsen data, up from 11.7% in the prior year

Gibson added that the year ahead should set up the business to "deliver strong sales and profit growth" over the medium term.

"In 2023 we will continue to strengthen and improve our leading customer proposition, including investing in value to help customers manage cost of living pressures, while keeping tight control of our costs. We will also be doing much more to unlock the potential of our partners, combining the benefits of Ocado's technology with the magic of M&S products."

https://www.youtube.com/watch?v=8AuH66Vr3NA

Analyst Comment

Commenting on its performance, analyst Russ Mould of AJ Bell said, “A 2023 recovery in the shares of online groceries firm Ocado was snuffed out after the company reported sales growth which was dwarfed by inflation and by the performance of traditional supermarkets and offered an uninspiring forecast for the rest of the year.

“While Ocado is winning new customers, people are buying less. This has an outsized impact on online deliveries which cost roughly the same to make whether the order is two potatoes and a block of cheese or a full weekly shop.

“Even with tiered charging based on how much you order, shrinking basket sizes are still likely to have a material impact on margins. Ocado is also at a premium price point which isn’t exactly aligned to the pressures on household budgets in the UK.

“Pointing to a strong rebound in 2024 requires investors to take a lot on trust and it doesn’t look like the market is willing to extend Ocado this courtesy."

© 2023 European Supermarket Magazine – your source for the latest technology news. Article by Stephen Wynne-Jones. Click subscribe to sign up to ESM: European Supermarket Magazine.

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