DE4CC0DE-5FC3-4494-BCBF-4D50B00366B5
Technology

Ocado Retail Sales Rise As Sharper Prices Win More Customers

By Reuters
Share this article
Ocado Retail Sales Rise As Sharper Prices Win More Customers

British online supermarket Ocado Retail kept its guidance for the year as it reported a 10.6% increase in first-quarter revenue reflecting growth in customer numbers.

The 50:50 joint venture between Ocado Group and Marks & Spencer said that a focus on sharper prices was working.

"We have made a strong start to the year, building on the momentum we established in 2023," CEO Hannah Gibson said. "Our strategy is resonating with customers and volume growth is building well."

In an analyst note, AJ Bell stated, 'Sales were up and not just because of rising prices. The venture is actually seeing significant volume growth as it wins market share. This is partly because it saw less price inflation than the wider market.

'This positive trading comes after a long period of disappointing performance and you can understand Marks & Spencer’s frustration – when it agreed the tie-up with Ocado in 2019 it set targets which have subsequently not been met.'

ADVERTISEMENT

Quarterly Highlights

Ocado Retail said average selling price growth in its first quarter to 3 March was 2.2% – below grocery market inflation, which was 5.3% in researcher Kantar's February report.

It lowered the prices of 1,700 products during the period and also added more M&S lines to its range.

Retail revenue in the quarter was £645.3 million (€752.4 million) and active customers rose 6.4% to 1.02 million.

Volume, or total items sold, grew 8.1% to 242.1 million, with average orders per week up 8.4% to 414,000 and average basket value up 2.1% to £125.47.

ADVERTISEMENT

Ocado Retail stuck with its guidance for full-year 2023-24 revenue growth of 'mid-high single digits percent' and an underlying EBITDA margin of about 2.5%.

Joint Venture

Ocado Group and M&S are wrangling over a final payment for M&S's share of the venture which was formed in 2019.

M&S says the business has not met the performance criteria for the payment. Ocado Group says the target should be adjusted and has threatened legal action.

"The conversations are ongoing ... It's a conversation between Ocado Group and Marks & Spencer," Gibson told reporters after the joint venture updated on trading.

ADVERTISEMENT

"I know there's been a lot of focus externally on our shareholders (Ocado Group and M&S) but I am just 100% focused on running the business, improving the proposition for our customers," she said, adding that the row was not impacting the day-to-day operation of the business.

M&S did not have an immediate comment.

Analyst Comment

AJ Bell commented, 'Any joint enterprise doesn’t have the best prospects if participants are at odds with each other, but the Ocado Retail venture has enjoyed a robust period of trading despite the differences between partners Marks & Spencer and online groceries specialist Ocado.'

'At least the turnaround efforts at Ocado Retail appear to be bearing fruit. However, whether Marks & Spencer will continue its arrangement with Ocado has to be open to question given the somewhat fractious relationship,' it added.

ADVERTISEMENT

Last month, Ocado Group reported a reduced annual loss and said it would not make a profit at the pretax level for five or six years.

Online's share of Britain's total grocery market was about 7% before the onset of COVID-19 in 2020. It peaked at about 15% during the pandemic but has since fallen back to about 12%, industry data shows.

News by Reuters, additional reporting by ESM.

Get the week's top grocery retail news

The most important stories from European grocery retail direct to your inbox every Thursday

Processing your request...

Thanks! please check your email to confirm your subscription.

By signing up you are agreeing to our terms & conditions and privacy policy. You can unsubscribe at any time.