Ocado has warned that its joint venture with Marks & Spencer will see earnings and sales weighed down by growing pressure on customers’ spending.
Ocado Retail, which is owned 50-50 by the two companies, said sales tumbled further in recent weeks as shoppers bought less to cope with the cost-of-living crisis.
It said sales declined by 8% in the quarter to April 25, compared with a 5.7% fall in the previous quarter.
The online retail business said it has benefited from a rise in customer numbers, which have grown 12% in the year to date.
However, it highlighted that “the rate of growth has slowed as consumers respond to short-term discounts and promotions”.
It said sales growth for 2022 is now expected to be “in the low single digits” as it heavily cut its previous forecast of 10%, due to the expected heightening of cost-of-living pressures amid further rises in utility prices.
The group added that this, combined with higher energy bills and food costs for the business, means it expects low single-digit earning margins.
“Since Ocado Retail’s Q1 trading update on March 17, the trading environment has deteriorated, as has been widely reported in industry data, with the cost-of-living crisis compounding the impact of a return to more normal consumer behaviours as restrictions have ended and many people return to the office,” it said.
The warning came as M&S itself said price inflation is resulting in smaller sales volumes from customers.
Ocado Retail said food price inflation in the average basket is currently “in the low single digits” although it flagged “high cost inflation” being experienced by food suppliers and other firms in its supply chain.