British online supermarket Ocado Retail kept its financial guidance for the full year as it reported a 3.4% rise in first quarter revenue, driven by more customers using its service.
The business, a 50/50 joint venture between Ocado Group and Marks & Spencer, said retail revenue in the 13 weeks to Feb. 26 was £584 million (€663.8 million), up from £565 million (€642.3 million) in the same period last year.
Ocado Retail said average orders per week rose 3.6% to 381,000, with active customers reaching 951,000 at the end of the quarter, up 13.8% year-on-year.
It said average basket value was flat, with a 7.5% fall in the average number of items bought to 45, offset by an 8.3% rise in average selling prices.
The online business maintained its financial guidance for the full 2022-2023 year - of 'mid-single digit' revenue growth, with an improving trajectory during the year, and 'marginally positive' core earnings or EBITDA, versus a £4 million loss in 2022.
'Attract More And More Customers'
"We continue to attract more and more customers to Ocado, by investing in great value for customers including our new Ocado Price Promise and providing unbeatable choice and service," commented Hannah Gibson, Ocado Retail's chief executive. This means more perfect orders that are on time and in full, with deliveries back to the kitchen table."
Gibson added that while the trading environment remains "challenging", the company is expecting momentum to accelerate during the second half of the year, "as we improve our proposition, grow our customer base, and no longer lap COVID shopping behaviours.
"This solid 2023 performance will enable us to return to sales growth and profitability."
Analyst Viewpoint
Commenting on Ocado Retail's performance, analyst Russ Mould of AJ Bell said, “There are two ways of looking at Ocado’s latest trading update. The negatives are that revenue is growing much slower than the rate of food inflation and the average basket size is in decline. The positives are that the Ocado/Marks & Spencer joint venture continues to grow its active customer numbers which suggests it must be doing something right.
“There have been worries that customers were trading down from the more expensive Ocado offering to cheaper options such as Tesco or Aldi. The latest trading update would imply that Ocado and Marks & Spencer can rest easy. It’s better to have a growing pool of active customers and wait for cost-of-living pressures to ease and basket sizes to improve than lose customers to rivals.”
Elsewhere Joe Dawson, retail analyst at GlobalData, pointed to "light at the end of the tunnel" for the business amid declining inflation and reductions in energy bills as summer approaches.
"The number of active customers increased by 13.8% to 951,000 compared to Q1 FY2021/22, signalling growth in the appeal of online food & grocery shopping, and its new Ocado Price Promise shows that the grocer is stepping in the right direction to appeal to consumers looking for convenience and low prices. The scheme will see over 10,000 products matched to Tesco’s prices, with Ocado making up the difference in vouchers if the bill is higher than the supermarket’s.
“While price matching may provide short term relief as the cost-of-living crisis rages on, it has been implemented too late in the game so will be unlikely to help maintain a long-term customer base, and Ocado must not fall into the trap of setting an expectation of lower prices for online food and grocery shopping."
News by Reuters, edited by ESM – your source for the latest retail news. Click subscribe to sign up to ESM: European Supermarket Magazine.
