Ocado Retail Limited (ORL) has reported a 17.5% year-on-year increase in revenue to £715.8 million (€849.6 million) in the fourth quarter of its financial year, retaining its position as the fastest growing grocer in the UK.
Volumes on Ocado.com grew 17.0% year-on-year and average orders per week grew by 16.9% to 476,000 during the quarter, the company noted.
Ocado added that its average basket sizes were stable and average selling prices were flat as it continued to invest in price and value ahead of the market.
AJ Bell said in a note, '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.'
The retailer noted that it achieved its 'highest-ever level of sales' over the peak Christmas trading period without disclosing figures.
In an analyst note, Shore Capital stated, 'In terms of Christmas 2024 trading, ORL is less forthcoming, talking to ‘record-breaking’ trade, which makes us suspicious that momentum may have dipped a little. [...]
'We do know it offered hot honey halloumi to its customers, meanwhile its Luton Customer Fulfilment Centre (CFC) can pick 269 units per hour, noting that ORL’s profit problem is not the efficiency of picking but fulfilment costs.'
Full-Year Performance
In the 52 weeks ended 1 December 2024, the company's retail revenue grew 13.9% to £2.7 billion (€3.2 billion), while volumes on Ocado.com increased by 12.9%.
Average orders per week grew by 12.5% during the year.
Shore Capital added, 'In the market to the end of December, NIQ suggests that ORL grew well ahead of a market where grocery online share contracted year-on-year, so a very commendable sales and channel performance.
'That said, the broader measure of the business’ financial potency still leaves a bit to be desired from a profitability perspective, something we sense one side of the joint venture has a greater respect and realisation of achievement than the other.'
The company attributed its good performance to its active customer base growth of 12.1%, or 1.1 million active customers, and greater shopping frequency.
The average basket value increased by 1.0% to £122.09, with basket size up 0.3% to 44.3 items and a 0.6% increase in ASP, well below UK grocery inflation of 3.0%
The company added that its topline growth, as well as continued focus on cost and efficiency, has resulted in strong EBITDA growth.
Outlook
Ocado Retail is confident that the business will continue to show market-leading sales growth and volume momentum in FY 2025.
Hannah Gibson, Ocado Retail's chief executive officer, said, "As we enter the next phase of our strategy, we are excited about the future of online grocery and our role in shaping it.
"Priorities for this year are raising the bar again in our leading customer proposition, making further progress on improving profitability, and transitioning the business onto new technology platforms."
It expects to make further progress on driving operational efficiency and scale leverage, as it seeks to achieve a high mid-single digit adjusted EBITDA margin in the mid-term.
Shore Capital noted, 'So, in conclusion, we are pleased to see the ORL trading momentum and higher aspired EBITDA, especially so for M&S. That all said, to be totally clear, EBITDA is not the measure to be used to measure ORL or Ocado Group’s financial performance.'
'That ship sailed some years ago, notably when zero interest rates ended. Looking ahead, base rates look higher for longer due to inflation concerns, and so no respite on the need for Ocado Group to deliver a recurring PBT.'
