Britain’s Ocado Retail saw a return to growth in the number of items sold during the last month of its latest quarter, marking its first uptick since the COVID-19 pandemic. This positive trend can be attributed to the increasing number of customers who are now shopping more regularly at the online supermarket.
The increase in volume played a crucial role in the 50/50 joint venture between Ocado Group and Marks & Spencer, resulting in a 7.2% surge in revenue, reaching £570 million (equivalent to $705 million) for its third quarter ending on August 27. This figure represents a notable improvement compared to the 5% growth reported in the first half.
Ocado Retail reported a “promising” start to its fourth quarter, and on Tuesday, shares of Ocado Group, which have experienced significant fluctuations in recent months, rose by 3.2%. Additionally, shares of M&S increased by 1.8%.
Prior to the emergence of COVID-19 in 2020, online sales accounted for approximately 7% of the total grocery market in Britain. This proportion reached its highest point, approximately 15%, during the height of the pandemic. However, as consumers gradually returned to physical stores, the online market share has subsequently decreased to around 10%.
During a press briefing, Ocado Retail’s CEO Hannah Gibson conveyed that the growth in volume was a result of a 1.5% uptick in active customers, now totaling 961,000. Additionally, there was a 1.9% increase in the average number of weekly orders, which reached 381,000, and a stabilization in the average basket size, maintaining at 44 items.
“Those three things coming together means that volume growth has come earlier than expected,” she said, noting it had not been anticipated until the fourth quarter.
Gibson said the shift to online shopping would step up when Britain’s cost of living crisis eases.
“If you just think about Generation Z of today, we’re not going to be seeing 10 or 11% of those shopping online, it is going to be more,” she said.
In the third quarter, Ocado Retail observed an 8.4% increase in its average selling price. It’s worth noting that this growth rate was below the market inflation rate, which currently stands at 12.2%, as reported by the latest industry data.
Gibson mentioned that since June, Ocado Retail has implemented price reductions on over 650 items.
Ocado Retail reiterated its anticipation of achieving “mid-single digit” revenue growth and maintaining “marginally positive” core earnings (EBITDA) for the entirety of the 2022-23 fiscal year, a significant improvement from the previous year’s loss of £4 million.