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Return to lockdown boosts Ocado sales by 40%

Oscar Williams-Grut
·Senior City Correspondent, Yahoo Finance UK
·2-min read
An Ocado delivery van. Photo: Matthew Childs/Reuters
An Ocado delivery van. Photo: Matthew Childs/Reuters

The return to lockdown at the start of the year has boosted sales at UK online grocery Ocado (OCDO.L).

Ocado said on Thursday that sales at its retail subsidiary had jumped by 40% to £599m ($753m) in the 13 weeks to 28 February. Average orders per week rose by 2.5% on an annual basis to reach 329,000.

The average order size was £147, boosted by big seasonal shops and "a temporary reversal of the trend towards normalised shopping behaviour in response to further national lockdown measures in the UK."

"Over the last twelve months, there has been a dramatic and permanent shift towards online grocery shopping around the world," Ocado founder and chief executive Tim Steiner said. "Millions of customers have experienced online grocery shopping through the pandemic and many of them will not be going back to bricks and mortar."

Ocado plans to open several new customer fulfilment centres this year, including smaller sites that can deal with new order formats like Ocado Zoom — the company's same-day delivery service.

"We opened one mini Customer Fulfilment Centre in Bristol last month, which gives us capacity to serve more customers and with the opening of Purfleet and re-opening of Andover, both later this year, we ultimately expect to ramp our overall capacity by 40% with these sites," said Melanie Smith, Ocado Retail's chief executive.

The company warned that performance figures could start to suffer in the coming months. Shopping patterns are likely to "normalise" as lockdown ends and people begin to eat and drink out again. Sales figures will also start to be compared to pandemic periods last year when sales were through the roof.

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"While this year's quarterly sales figures will reflect the year-on-year comparisons with periods of full lockdown, we expect strong growth over the coming years as we continue to lead the charge in changing the UK grocery landscape, for good," Smith said.

Shares in Ocado slipped by a third of a percent in London.

"Doubts abound over whether Ocado can make those home delivery numbers stick, a concern reflected in the share price," said Ross Hindle, an analyst at Third Bridge.

Hindle said the business was going through a "purple patch" but investors were concerned by "fears of a fickle market."

"When Ocado bumped up against capacity constraints this quarter and delivery spots jammed, shoppers simply booked elsewhere," he said. "Accordingly, average orders per week actually fell from 360,000 in Q4'20 to 329,000 during the quarter."

Ocado Retail is a joint venture with Marks & Spencer (MKS.L) and Ocado said M&S items now account for 25% of all purchases through its store.

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