Amazon who? Ocado shares jump as it delivers 14 per cent sales rise
Everyone and their mum may be trying to get into the food delivery business at the moment (Amazon and Uber have both just launched offerings…) – but Ocado has suggested with experience comes wisdom, after it posted a juicy rise in sales.
The figures
Retail sales rose 13.9 per cent to £582.9m in the 24 weeks to the end of May, while revenues rose 15.1 per cent to £584.2m.
That meant Ocado was able to do something it has found pretty challenging in during its 16 years of operation: turn a profit. Pre-tax profits rose to £8.5m, up from £7.2m during the same period last time. Although statutory debt also increased, from £105m last year to £136.2m this year.
Shares rose 10.5 per cent to 230p in early trading.
Why it's interesting
What with German discounters taking over the world and US rivals trying to muscle in, the grocery market isn't an easy place to be at the moment. Indeed, when Amazon launched its food delivery service in the UK earlier this month, Ocado shares hit a three-year low.
But the company, which has had its fair share of challenges in recent years (not least its move downmarket, from a tie-up with Waitrose to one with Morrisons), seemed cautiously optimistic.
"Ongoing price competitiveness and deflationary pressure combined with changing customer behaviour, in particular with continued shifts to discount stores and online, have been reflected in declining store volumes at large supermarkets and continued margin pressure," Ocado admitted today.
But it added that its order volumes had grown to more than 250,000 per week for the first time. So things could be looking up – just don't mention the B[rexit]-word…
What Ocado said
Tim Steiner, the company's chief executive, said:
We have been gaining share in the online grocery market and expect this to continue. The last few years have shown beyond doubt that British shoppers are choosing the benefits of grocery shopping online and we believe that the momentum of channel shift away from bricks and mortar stores will continue. The more opportunities customers have to try grocery shopping online, the more they will be attracted to Ocado's superior customer offer.
What analysts said
Clive Black, head of research at Shore Capital, was critical:
What is Ocado? It is no longer a propreitary grocer of any substance in the UK, that aspiration went some time ago when it metamorphosed into a pure-play picker, packer and deliverer of groceries for other grocers with a stronger consumer brand. Indeed, the business is sub-scale as a grocer and so must now live off its skills as a facilitator, where we do admire its customer service. However, despite being a picker extraordinaire is a questionable basis for a rating that needs to deliver more financially and strategically.
In short
Not an easy time for anyone, let alone retailers struggling in a competitive market. But Ocado showed a glimmer of hope.