Ocado retail sales accelerate as it joins forces with M&S
Ocado will sell M&S products through the retailers’ Ocado Retail joint venture from September 2020.
Ocado’s retail business saw sales accelerate in the third quarter as weekly customer orders continued to rise.
The results were the first for Ocado Retail, the online grocer’s retail arm created as part of its £750 million joint venture with Marks & Spencer. M&S products will be available through Ocado from September 2020 at the latest.
Weekly orders through Ocado rose 12.1% as it was buoyed by increased delivery slots during the period to September 1.
Melanie Smith, M&S’s former strategy director who took the reins at the joint venture last month, said the results highlighted Ocado’s “resilience” following the fire at its Andover facility.
Ocado posted a £142.8 million loss in the half-year to June after it was weighed down by the impact of the fire at the Hampshire site.
But the company said revenues continued to be strong in the latest quarter, rising 11.4% and putting the company in line with its guidance for the rest of the year.
It represents an acceleration after the company posted 9.7% revenue growth in the first half of the year.
Ocado said that this revenue growth was enabled after it created additional capacity at its Erith distribution centre.
Revenues also continued to surge despite a slight decline in the size of orders, which dipped 0.8%, as customers shopped more regularly.
A tie-up previously met with some scepticism is off to a reasonable start. The real test for the combination is yet to come though Russ Mould, investment director at AJ Bell
The company has seen its shares continue to jump in 2019, rising more than 70% since the start of the year as it was buoyed by international deals as well as the collaboration with M&S.
Duncan Tatton-Brown, Ocado’s finance director, said there is potential for its venture with the retailer to start ahead of the proposed September 2020 launch date.
He added: “There is a chance it could be moved forward if all the parties can come to an agreement.
“Regarding Brexit, we have done some already very extensive planning to be prepared for whatever outcome we get. Our capacity to stockpile things is limited because obviously we can’t stockpile fresh food, but we are in the same position as others in the market.”
Melanie Smith, Ocado Retail’s chief executive officer, said: “These first set of results from the joint venture between Ocado Group and M&S show the resilience of Ocado following the Andover fire and the momentum the business now has.
“As we continue to enhance our offering and add more capacity in the UK, our leading partnership will deliver the very best experience to an ever-growing number of customers.
“Bringing Ocado and M&S together online will give UK consumers even greater choice, value and service and will create important new opportunities for our colleagues, suppliers, and other stakeholders.”
Tim Steiner, Ocado Group’s CEO, said: “As chairman of Ocado Retail, I would like to welcome Mel to her new role.
“Together, we are committed to improving even further the Ocado customer experience and growing the business to the benefit of all our stakeholders.”
Russ Mould, investment director at AJ Bell, said: “A tie-up previously met with some scepticism is off to a reasonable start. The real test for the combination is yet to come though.
“While there may be some disappointment at a slight fall in average order size, in the main these numbers are likely to be greeted with a bit of a shrug.”
Shares in the company were 0.7% higher at 1,358.5p in early trading.