Ocado Retail today posted a 5.7% fall in revenues for the first quarter of its financial year, as shoppers placed more orders but spent an average 15% less on each. This, it says, reflects the post-Covid 19 return to the office and easing pandemic restrictions. Looking ahead, it sees prices rising but says it will work to ensure it offers fair value.
The online grocer said retail revenues of £564.7m were 5.7% lower in the 13 weeks to February 27 than a year earlier. Shoppers placed an average 367,500 orders a week (+11.6%) but spent an average £124 (-15%) on each. Demand, says Ocado, is continuing to return to pre-Covid shopping patterns, with peaks and troughs through the week. Active customer numbers have grown by 31% to 835k.
Economic challenges
Ocado Retail is warning of the rising prices in areas from raw materials to energy and dry ice, and cites industry data that suggests food prices rose by 4.3% in February – the fastest rate of increase since 2013. At the same time, the UK grocery market was 4% lower in the first quarter than last year. Ocado says it has been working with suppliers to manage the level of inflation, but that it has raised prices in line with the rest of the market, where it could not mitigate cost. It says it will continue to monitor the market to ensure it is offering fair prices.
Melanie Smith, chief executive of Ocado Retail, says the last quarter has been an encouraging one for Ocado Retail “despite the clearly evident challenges the industry and consumers are facing”.
She adds: “Active customers have increased by 31%, demonstrating the continued strong appetite for Ocado’s unique and market-leading brand of online grocery. Of course, as we have seen since the end of Covid restrictions, the value of the average basket and shape of the week continue to normalise as we return towards the rhythm of our pre-Covid lives. Given that we are comparing a post-lockdown quarter this year with a lockdown quarter last year, this has meant that sales were down 5.7% in the quarter, not helped by the softening market overall, with smaller baskets offsetting the increase in the number of customer transactions in the quarter.
“Long term, we are confident that the trajectory of growth remains positive. That growth is underpinned by our quality customer service and high customer satisfaction (we were recently named Which UK’s recommended online supermarket) and enabled by our investment in new hyper-efficient automated customer fulfilment centres which bring wide ranges, the freshest produce, and the best on-time delivery in the market, all at fair value, across the full range of price points, to our fast growing number of UK customers.”
Ocado continues to add fulfilment capacity, with a new site at Bicester set to add capacity for 30k orders a week, while there’s also room for capacity at existing sites including Andover and Purfleet to double. It will open its second Zoom site – supporting one hour deliveries within London – at Canning Town in the spring, with more sites to follow over the next year. By the end of the year, Ocado Retail expects to have capacity to deliver more than 630k orders per week.
Ocado Retail has contributed £150,000 to the DEC Ukraine Crisis Appeal, to help those suffering from a “human tragedy” that “has shocked the world”.
Ocado is a Top500 retailer in RXUK Top500 research.
