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Ocado reports 30% sales growth

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Online grocer Ocado has today reported its first financial update since its flotation on the London Stock Exchange.

Ocado reported a 29.5% rise in gross sales to £126.5m in the 12 weeks to August 8 from £97.7m at the same time last year, while average weekly orders in the same period rose to 92,834, from 70,968 at the same time last year. Average order size was down slightly, at £113.59 compared to £114.73 last time.

More sales were made over mobile phone, through iPhone and Android apps, while new features such as the Service Counter, where meat and fish are filleted and prepared to order, also saw good uptake, the company said.

Ocado’s flotation, which took place in July, raised money for investment in a second fulfillment centre. Today it said it had identified potential sites for a second fulfillment centre and spokes in the South of England, and that negotiations were progressing.

Tim Steiner, chief executive of Ocado, said: “In this period Ocado entered the next phase of its development, becoming a public company.” He added: “Given increased customer demand and our need to increase capacity it was an appropriate time for the company to raise capital for growth. “

But despite increased sales, shares in the company fell over the course of this morning. Shares opened at 157p but by noon had fallen to 149.5p, losing 7.5p or 4.78% of their value.

Neil Saunders, consulting director of Verdict, said: “The sales numbers at Ocado are pleasing and underline the strong appeal of the customer proposition. However, the key challenge is for these sales to translate into profit and there is little indication that the Ocado is near to breaking even. That has to be a concern for shareholders

“With other players such as Morrisons and possibly M&S looking to move online, with Waitrose growing its own reach and with a more challenging economic environment, Ocado will need to redouble its efforts to maintain sales volumes and to reverse its losses.”

His comment reflects reports that Morrisons supermarket chain is expected to unveil plans to sell online when it reports its first-half results this week.

The briefing, on Thursday, will be the first from new chief executive Dalton Philips. He is expected to outline initial details of the move, which will make Morrisons the last big supermarket group to sell groceries over the internet.

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