Ocado Retail kept to its full-year outlook today after reporting a step-up in third-quarter revenues, helped by a return to volume growth in the last month of the period.
Over the 13 weeks to 27 August, the joint venture between Ocado Group and M&S saw its revenue climb 7.2% to £569.6m – an improvement on the 5% growth recorded in the first half of its financial year.
Ocado benefitted from a 1.5% rise in active customers to 961,000, with average orders per week up 1.9% year-on-year to 381,000 and average basket value rising 4.2% at £120.7m.
After seeing a return to growth in the number of items sold towards the end of period, CEO Hannah Gibson revealed this morning that the business had previously not expected a return to volume growth until the fourth quarter.
Ocado’s average selling price was up 8.4% over the quarter, but the business noted this was lower than inflation in the wider grocery market. It has rolled out a series of price cuts in recent months to reflect easing cost pressures.
Gibson expects “further (price cuts) to come” as it continues to improve in terms of how shoppers rated the supermarket for value, helping it attract shoppers from a wider range of stores.
The group said it had started the final quarter “positively”, and still expected to report “mid-single digit” revenue growth and “marginally positive” EBITDA for its 2022/23 year, versus a loss of £4m in the previous year.
Earlier this year, M&S Chairman Archie Norman told investors he was “not happy” with Ocado Retail’s performance, while Ocado Group’s CEO Tim Steiner also noted that the joint venture, formed in 2019, was not where both partners wanted it to be.
Gibson said today: “It has now been a year since I joined Ocado Retail, and in January we set out our perfect execution strategy, making sure every element of our customer proposition and our operating model is at its best. We are delivering on this plan and have great momentum in the business, with revenue growing faster in Q3 than in H1 and a return to positive volume growth in the last month of the quarter.”
She added: “We continue to deepen our collaboration with M&S, including hundreds of new M&S lines set to launch in the Autumn. Together with our partners, we are intent on bringing even lower prices, more choice, and greater convenience to our customers. We are making good progress, but we want to go even further.”
NAM Implications:
- Ocado beginning to edge forward…
- …but not to the total satisfaction of the joint owners.
- That may press for a more radical solution that eventually sees M&S go elsewhere.
- Meanwhile, time to check you are achieving your fair share of sales and investment?
