- Ocado Retail revenue up 15.5% to £658 million
- UK’s fastest growing grower for seven months in a row
- Average basket value was broadly flat at £120.97
Shares in Ocado (OCDO) were up more than 7% to 375p in morning trading as the company raised 2024 revenue guidance for its Ocado Retail joint venture with Marks & Spencer (MKS) to low double-digit growth following a strong performance in the first three quarters of the year.
The announcement came as the company reported a trading update for the 13 weeks to 1 September.
The company also said it expected an adjusted EBITDA (earnings before interest taxation depreciation and amortisation) margin for full year 2024 of circa 2.5% excluding annual Hatfield fees of £33 million.
UK’S FASTEST GROWING GROCER
Ocado Retail third quarter retail revenue grew by 15.5% to £658 million. Volumes of total items grew 15.4% year-on-year and average orders per week grew by 14.7% to 437,000 driven by growth in active customers of 10.3% year-on-year.
The online grocery retailer seems to be on a roll as it has also been voted the UK’s fastest growing grocer for seven consecutive months, according to data from research firm Kantar.
‘HOUSEHOLDS FEELING MORE CONFIDENT’
‘Sales may be benefiting from an uptick in demand for online groceries as people’s lives return to a busier pattern post-Covid and from households feeling more confident and able to trade up from rivals, says AJ Bell’s investment director Russ Mould.
‘However, there are signs that in order to achieve this improvement in sales the Ocado joint venture is making compromises on price, and this means the impressive growth in sales will not necessarily be reflected in better earnings, with margins pretty skinny. Such a strategy may be worth it over time if the company achieves stronger market positioning, but it may temper some of the enthusiasm for the firm’s evident progress.
‘Still, after a torrid time, today’s news is a boon for the wider Ocado group which recently reported a big narrowing of first-half losses and progress on its partnerships with global supermarkets.’
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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 (Tom Sieber) owns shares in AJ Bell.
