Skip to main content
  • Register
  • Help
  • Contact us

Ocado Q1 revenues soar 40% amid latest Covid lockdown

Thu 18 March 2021 07:00 | A A A

No recommendation

No news or research item is a personal recommendation to deal. Hargreaves Lansdown may not share ShareCast's (powered by Digital Look) views.

(Sharecast News) - Online supermarket Ocado Retail said it expects positive revenue growth in the second quarter after reporting a 40% rise in sales for the 13 weeks to the February 28 as more Britons had their groceries delivered during the current national Covid lockdown.

Revenue over the period, which included the Christmas holidays, came in at £599m against £428.8m a year earlier, the company said on Thursday. Average orders per week rose 2.5% to 329,000.

Melanie Smith, chief executive of Ocado Retail said the second quarter of 2021 represented the one year anniversary of the start of the Covid-19 pandemic which accelerated the demand for online groceries.

"While this year's quarterly sales figures will reflect the year-on-year comparisons with periods of full lockdown, we expect strong growth over the coming years as we continue to lead the charge in changing the UK grocery landscape, for good," she said.

The average order cost £147 as shoppers spent more on home deliveries as stricter coronavirus restrictions were suddenly announced in England, forcing many people to alter their Christmas plans at short notice and during the national lockdown that followed quickly in January.

Group chief executive Tim Steiner repeated his belief that the pandemic had permanently changed shopping habits. "Millions of customers have experienced online grocery shopping through the pandemic and many of them will not be going back to bricks and mortar," he said.

Ocado Retail, a joint venture between Ocado Group and Marks & Spencer, said it planned to open opening two standard sized customer fulfilment centres (CFC) in fiscal 2021, having opened a mini warehouse in Bristol as it mapped out plans for expansion of CFC sites.

A minimum of 12 new micro sites are being sought, mainly in London, to support the roll-out of the "Ocado Zoom immediacy concept" which offers deliveries within one hour of ordering, it added.

"A second mini CFC will open in 2022 and progress is being made securing sites for further standard sized CFCs," Ocado said.

Hargreaves Lansdown analyst Sophie Lund-Yates said future comparisons against last year when people were stockpiling "will be a lot tougher".

"As such, retail revenue and profits are expected to grow at a slower rate. That's to be expected, but Ocado's banking on the pandemic having triggered a long-term increase in demand for online groceries. With capacity being ramped up, it's important there's enough demand to match."

"Ocado and M&S' higher-end proposition sets it apart from other online supermarket offerings, and having a unique selling point in the uber competitive grocery market should hold the group in good stead. Let's not forget this is important for M&S too - which is in the middle of trying to rejuvenate growth."

Lund-Yates added that Ocado's share price valuation "is still some way above the ten-year average" and supporting the share will depend more on brokering new partnerships in its warehouse solutions business and less on the retail business, "which is more of a nice-to-have than a strategic lynch pin".

    The value of investments can go down in value as well as up, so you could get back less than you invest. It is therefore important that you understand the risks and commitments. This website is not personal advice based on your circumstances. So you can make informed decisions for yourself we aim to provide you with the best information, best service and best prices. If you are unsure about the suitability of an investment please contact us for advice.

    More company news from ShareCast