- Fourth-quarter retail revenue up 17.5%
- Average basket value up by 1% to £122.09
- Shares gain 9% to 296p
Shares in Ocado (OCDO) gained as much as 10% in early trading after the company said fourth-quarter retail revenue grew by 17.5% to £715.8 million.
Ocado retail is a joint venture between Ocado group and Marks & Spencer (MKS).
The online grocery retailer was reporting a trading statement for the 13 weeks to 1 December.
Ocado said it delivered ‘another record-breaking’ Christmas with its highest level of sales over the peak Christmas trading period.
The latest set of fourth-quarter results showed that the joint retail venture with Marks & Spencer is starting to pay off.
‘We know M&S products continue to bring new customers to Ocado.com. Alongside our strong range of bigger brands and Ocado Own Brand, we also offered more innovation and newness to customers through our challenger brand,’ the company said.
GROWTH IN VOLUMES
Full year volumes for total items on Ocado.com grew by 12.9% and average orders per week grew by 12.5%, driven by growth in active customer base of 12.1% to 1.1 million active customers, as well as increased frequency.
Ocado Retail’s CEO Hannah Gibson said: ‘2024 was a year of strong growth. In the fourth quarter, we accelerated sales again - reaching 500,000 orders per week for the first time, at the end of November.’
Management expressed confidence in delivering continued market leading sales growth and volume momentum in 2025.
The company said expectations for further growth at Ocado Retail will be provided at the Ocado Group full year results on 27 February 2025.
In the mid-term the company is targeting a high mid-single digit adjusted EBITDA (earnings before interest, taxation, depreciation, and amortisation) margin.
EXPERT VIEW
Russ Mould, investment director at AJ Bell said: ‘Ocado’s retail joint venture with Marks & Spencer finally seems to have cracked the recipe for success. There are significantly more customers and they’re shopping more frequently. This performance should settle some nerves at Marks & Spencer given relationships have been fragile between the two partners. The key challenge is to sustain this momentum.
‘Now the ship has been steadied, the big question is what happens to the joint venture longer-term. Marks & Spencer is on a roll with its whole business and might take the view that it would prefer to have full control over its online food delivery service. If that happens, Marks & Spencer would still be reliant on Ocado technology and would have to pay royalties. Longer-term, it could potentially look to develop systems in-house or use another partner as an alternative.
‘The big unknown is whether Marks & Spencer feels the venture is sufficiently robust enough to take the leap into the unknown and go solo.’
LEARN MORE ABOUT OCADO
DISCLAIMER: Financial services company AJ Bell referenced in this article owns Shares magazine. The author of this article (Sabuhi Gard) owns shares in Ocado and AJ Bell and the editor (Martin Gamble) owns shares in AJ Bell.
