Ocado Retail, a partnership between online-only operator Ocado and Marks & Spencer, has reported a 39.7% increase in first-quarter revenue, to £599 million (€700 million).
"Over the past year, large numbers of UK consumers have made a permanent shift to online grocery shopping," commented Melanie Smith, Ocado Retail chief executive. "Ocado Retail is best placed to serve these customers."
Here's how leading retail analysts viewed its performance:
Thomas Brereton, GlobalData
“Ocado Retail’s Q1 results display the same trend it showed throughout 2020 – strong growth for a grocery retailer, but weak when put in context of the channel it operates in. The UK online food & grocery market grew 135.7% over the same period, driven by the more dynamic approach (i.e. increasing store pick capabilities) to online fulfilment seen at established grocery players such as Tesco, Sainsbury’s, Asda and Morrisons.
“Ocado is right to focus on national expansion to gain new customers. The online pureplay intends to open two more standard-sized customer fulfilment centres (CFCs) over the course of the next year, as well as seeking 12 more micro sites (primarily in London) to support the roll out of the rapid fulfilment Ocado Zoom service, following the successful launch of a similar site in Bristol.
"But while this focus on reducing fulfilment times is the right move for Ocado, there is certainly weight behind the idea that Ocado has failed to capitalise on its head start in this arena, with the likes of Deliveroo (which has a highly anticipated IPO set for April) and Uber Eats gaining traction throughout the pandemic.
“Of course, while Ocado may have missed the boat in this aspect, there is still a lot to be positive about. Demand for online groceries is clearly not dwindling, and Ocado’s operational rigidity is paving the way to improved profitability better than for many of its rivals.
"Its supply partner Marks & Spencer is also proving popular, with M&S products consistently accounting for over 25% of the average basket. But to become a real winner in the F&G market, Ocado needs to roll out new initiatives quicker – if only to prove to potential Solutions partners that it can cope with the fast-paced changes in consumer demands.”
Russ Mould, AJ Bell
“Ocado’s latest update focuses on its joint venture with Marks & Spencer rather than the whole group, which means we don’t get the news people really want to hear – namely if it has managed to sign up any new grocery customers for its technology platform.
“The venture with Marks & Spencer is doing well, so there is reason to be cheerful when looking at Ocado’s performance. Revenue has been soaring which reflects how the country continues to flock to the online channel to buy food and drink. Ocado is increasing capacity for order volumes via new mini fulfilment centres. It is also pushing the Ocado Zoom proposition which delivers goods within one hour of ordering. That puts Ocado in direct competition with Deliveroo which has partnered with Co-op to do a similar thing, with the latter promising delivery in as little as 30 minutes.
“We’re now at the point where the year-on-year comparative numbers for sales via Ocado’s website become harder to beat, given this time last year saw the beginning of a sharp increase in demand for online groceries as coronavirus took its grip on the world. Admittedly demand is still very high for online delivery slots so it’s unlikely we’ll see a sharp decline in the year-on-year numbers, but the pace of growth could be less pronounced in 2021.
“From a strategic point of view, the success of the UK joint venture gives Ocado the ideal shop window to prove its capabilities to prospective buyers of its technology. Investors have been buying its shares in the expectation that its systems will be snapped up around the world, so there is increasing pressure on Ocado to secure new deals.”
Clive Black Shore Capital
"Ocado Retail, the joint venture owned on a 50:50 basis by Marks & Spencer and Ocado Group, has announced
trading for Q1 FY2021, the thirteen weeks to the 28th February. Ocado Retail’s sales rose by 40% in the period, to £599m, which we deem to be strong, suggesting still high levels of demand for online groceries in the UK through the first two months of CY2021; something that we expect to be reflected in the trading updates of Sainsbury’s and Tesco through their respective preliminary results.
"Average order size elevated by orders per week rose by only 2.5% interestingly, average orders at per week at Ocado Retail rose by just 2.5%, to 329k, so permitting other players to fulfil the strong demand for online groceries through their more flexible store pick models; for example, Sainsbury’s Q3 FY2021 online grocery sales rose
by 128%, Encouragingly though, Ocado Retail is also stating that its average basket size remains especially elevated, this trading period corresponding with Christmas 2020 and lockdowns in its largely English markets; the average basket was £147, well up on a run-rate of c£105-110 in less pandemic disrupted markets.
"Interestingly, to us, the participation of M&S products, which replaced Waitrose & Partners as Ocado Retail’s supply partner in September 2020, is running at a stable rate of c25%, a participation level that we assume kicks in quite nicely to the buying terms of M&S, noting that the business retains on a sole basis the synergies from the Ocado Retail business."
© 2021 European Supermarket Magazine – your source for the latest retail news. Article by Stephen Wynne-Jones. Click subscribe to sign up to ESM: The European Supermarket Magazine.
