Ocado’s sales soar 40% in second quarter

Online supermarket and technology company Ocado said on Wednesday retail revenue had soared 40.4% year-on-year in its second quarter so far as shoppers in coronavirus lockdown sought deliveries to avoid venturing out.

That compared to growth of 10.3% in its first quarter to March 1, sending its shares up 3% at 0705 GMT, extending gains for the year to 35%.

Britain has been on lockdown since March 23 but Prime Minister Boris Johnson has said the country is past the peak of the pandemic.

He is expected to set out a plan on Sunday on how it might start gradually easing restrictions to allow a return to normal life.

Ocado said it had adapted its platform and ramped up capacity rapidly in order to meet unprecedented demand and was now delivering significantly more groceries to UK households than ever before.

It noted that the number of items per customer basket appeared to have passed its peak but remained high, as more normal shopping behaviour had returned.

The share of fresh and chilled products in the mix, relative to ambient store cupboard items, was also returning to normal, it said.

Ocado said it expected the long-term shift towards online grocery to accelerate post the COVID-19 crisis.

But it highlighted uncertainties about the length of the crisis, customer reaction immediately afterwards and its long-term impact on customers’ disposable incomes.

It said it had suspended its guidance for retail revenue for full year 2020 until it could accurately forecast likely outcomes.

Ocado’s retail business is a joint venture between Ocado Group and Marks & Spencer. Ocado’s supply deal with Waitrose will finish at the end of August, when it will be replaced with M&S.

Ocado has a stock market capitalisation of £12.2 billion, which is more than the combined market capitalisations of Sainsbury’s, Britain’s No. 2 supermarket group, and Morrisons, the No. 4 player.

The share price has mostly been driven by its state-of-the-art robotic technology which has enabled it to win partnership deals with supermarket groups around the world, including Kroger in the United States, Casino in France and Aeon in Japan.

In the second quarter Ocado delivered its first international robotic warehouses, which it calls customer fulfilment centres (CFCs), to Casino and Sobeys.

It said that despite the crisis it was not experiencing any material delays in the delivery of future CFCs for Ocado Solutions customers.

The group added that it has £1.2 billion of cash on the balance sheet.

Ocado investor Royal London Asset Management said it will vote against the online grocer’s pay report at Wednesday’s annual meeting, calling Chief Executive Tim Steiner’s £58.7 million reward “excessive”.