Ocado Retail has maintained its positive full-year financial guidance after posting an uplift in revenue in its first quarter despite continued signs that cash-strapped consumers are making cutbacks.
The business, a 50/50 joint venture between Ocado Group and M&S, saw its total retail revenue increase by 3.4% to £583.7m over the 13 weeks to 26 February. Average orders per week rose 3.6% to 381,000, while the number of active customers climbed 13.8% to 951,000.
However, the average basket value was flat at £124, and the average number of items bought fell from 49 to 45 as inflation reduced consumers’ spending power. Ocado revealed that there was an 8.3% rise in average selling prices.
The business fell to a loss in its 2021/22 financial year as even its typically more affluent shoppers felt the squeeze from the cost of living crisis.
Today, Ocado reaffirmed that it expected its performance to improve as this year progresses.
Hannah Gibson, Ocado Retail’s Chief Executive, said: “While the trading environment remains challenging, we expect to build momentum through the second half of the year, as we improve our proposition, grow our customer base, and no longer lap Covid shopping behaviours. This solid 2023 performance will enable us to return to sales growth and profitability.”
Ocado maintained its previous full-year guidance given in February of mid-single digit revenue growth and marginally positive EBITDA. It has also forecast a strong recovery in its 2023/2024 financial year.
Gibson noted that service levels were improving, with on-time delivery and order accuracy back to pre-pandemic levels, and an increased range of M&S products.
At the end of last month, Ocado announced that it would price-match thousands of Tesco lines in a bid to keep hold of shoppers amid intense competition in the sector. The online supermarket scrapped its previous price promise back at the start of 2021.
NAM Implications:
- Reduction in basket size will affect fulfilment-per-drop profitability.
- Therefore revenue levels are driven by inflation (‘an 8.3% rise in average selling prices’).
- Ocado appears to be on the way back to profitability.
- But price-matching thousands of Tesco lines in a bid to keep hold of shoppers…
- …may be too ambitious?
