The UK’s fastest-growing grocer, Ocado Retail, has upped its full-year revenue guidance after seeing sales jump 15.5% to £658.0m in its third quarter to 1st September as a renewed focus on value attracted more customers.
The acceleration from the 11% growth recorded in the first half was driven by a 15.4% increase in volumes, a 14.7% rise in weekly orders, and a 10.3% uplift in active customers to 1.06m.
The online supermarket noted that average selling prices across its range had decreased by 0.4% versus wider grocery inflation of 2.0%. Ocado has rolled out a series of price reduction initiatives this year as part of an effort to shed its upmarket image and broaden its customer base.
The retailer’s average basket value during the quarter was broadly flat at £120.97, while basket size (number of items) edged up 0.7% to 44.0.
The joint venture with M&S now expects its annual revenue to rise by low double digits, up from previous guidance for mid-high single digits. Core earnings margin is forecast to come in at around 2.5%, unchanged from its previous view.
Hannah Gibson, Ocado Retail’s Chief Executive, commented: “Our strategy remains focused on giving our customers unbeatable choice, unrivalled service and reassuringly good value. We’re seeing the momentum of this, with more customers shopping with us more often, getting even better service at better value.
“We know what our customers love, and we’re focused on our proposition every day. This includes our widest ever choice, including more M&S food, more convenience with better availability of delivery slots and products, further improving our high perfect order rate and better value for money through our Ocado Price Promise and our latest Big Price Drop.
“We’re pleased with the progress we’re making and excited about how much more there is to deliver.”
John Moore, senior investment manager at RBC Brewin Dolphin, suggested that Ocado was starting to deliver after a “bumpy period” for the company. He said: “Strong revenue, volume, and customer growth suggest the joint venture’s strategy is yielding results.”
But the online retailer is far from out of the woods. Russ Mould, investment director at AJ Bell, said: “There are signs that in order to achieve this improvement in sales, the Ocado joint venture is making compromises on price, and this means the impressive growth in sales will not necessarily be reflected in better earnings, with margins pretty skinny.”
