Ocado has posted an 11.2% increase in retail revenue in the first quarter of its financial year, with the business’s performance impacted by a fire at its Andover depot (pictured) in February.
“We all remain focused on delivering customers the very best service, quality, choice and value,” commented Tim Steiner, Ocado’s chief executive.
“Our commitment to these objectives underpinned the underlying progress we made in the quarter,” added Steiner.
Here’s how leading retail analysts saw its performance.
Thomas Brereton, GlobalData
“The key for Ocado now is to focus on longevity. While its explosive growth since conception in 2000 has generated tremendous traction and subsequent financial windfalls, it remains crucial that investment in new tech concepts and partnerships remains high, rather than cash being withdrawn to pay for large, short-term, share-incentivised bonus schemes.
“Although Ocado can expect a substantial influx of capital over the next few years, as international partnerships begin to bear fruit, it needs to deliver on its promise to 'innovate for the future' and turn its wider aspirations into reality.''
Fiona Cincotta, www.CityIndex.co.uk
“The fire at Ocado's robotic warehouse has slowed growth, and we're still yet to find out how the incident will affect this year's sales guidance.
“Otherwise, the retail business is performing reasonably well, with the average order size remaining pretty much stable, despite the uncertain consumer environment.
“The M&S deal will, of course, cut the level of profits that Ocado can make from its retailing arm in half, but it will also provide it with £750 million to plough into a promising technology offering, which, accidents aside, is where Ocado's real growth potential lies.”
Bruno Monteyne, Bernstein Research
“Initial assessments of the Andover incident indicate 'no significant implications for the risk profile of the assets or the viability of the model'. Along with the M&S JV deal, this will reassure the market that the 5 February incident does not impact the feasibility of the Solutions business. A new temporary spoke will be set up in Andover.
“The prior guidance of 10-15% retail sales growth is clearly void, and the company stated their intention to restate that guidance in due course. We estimate FY19 retail sales growth of 5% – and 12.5% prior to the Andover impact.”
Barclays European Food Retail Equity Research
“Ocado states that revenue growth was impacted by the fire at CFC3 in February – it estimates the impact at c1.2%% over the quarter as a whole. Given the fire happened two thirds of the way through the quarter, the 1.2 ppts impact would presumably been c3-4 ppt in the month following the fire.
“Ocado said it will inform the market in due course on its plans to replace the capacity at CFC3, and the impact that these will have on its target for 10-15% retail revenue growth in 2019.”
© 2019 European Supermarket Magazine – your source for the latest retail news. Article by Stephen Wynne-Jones. Click subscribe to sign up to ESM: European Supermarket Magazine.
