Ocado shares jump 14% after sales surge
The rise in sales comes after Ocado was dumped out of the FTSE 100 in June
Ocado shares rose by as much as 14% on Thursday before falling back after the online retailer said third-quarter sales had jumped to more than £650 million.
Ocado told investors that sales to late August climbed 15.5% from a year ago, far exceeding analyst expectations of nearer 10%. Average orders per week also rose almost 15% to 437,000.
The jump in sales comes after Ocado, which was launched in 2000, was dumped out of the FTSE 100 in June on the back of its valuation falling to roughly £3bn from a high of £22bn during the Covid-19 pandemic.
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Hannah Gibson, Ocado Retail's chief executive, said: "Our strategy remains focused on giving our customers unbeatable choice, unrivalled service and reassuringly good value. We're seeing the momentum of this, with more customers shopping with us more often, getting even better service at better value.
“We're pleased with the progress we're making and excited about how much more there is to deliver."
Ocado, run as a joint venture with Marks & Spencer, also reported more customers, with 1.06 million people shopping with the retailer over the period to late August, compared with 961,000 during the same period last year.
Should you invest in Ocado?
The company pioneered the idea of ordering your groceries online and having them delivered to your home. It is so closely associated with online food shopping that it has almost achieved verb status, in the same way that Google is inextricably linked with search engines.
Surveys show that 75% of Britons are aware of the brand. But while Google has been able to make billions in profits, Ocado, which is also attempting to reinvent itself as a technology company that can help other supermarkets develop their own online operations, has not succeeded in converting its ubiquity into hard cash.
One of the major reasons for this is that, while online shopping got a big boost during the pandemic, people quickly returned to the shops once restrictions were lifted, which is not surprising given that the vast majority of people in the UK live close to a supermarket.
Ocado’s online shop is also embroiled in a legal dispute with Marks & Spencer (which owns 50% of Ocado.com) over payments related to Ocado missing contractual targets.
Interactive Investor says: “On balance, consumer demand for online shopping is here to stay, with Ocado’s bag packing technology more efficient than in-store staff and trolleys.
“That said, global retailers appear reluctant to spend money on the required infrastructure just yet, and whether they use Ocado’s tech or an alternative is still playing out. It means Ocado shares will likely remain volatile and speculative.”
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Chris is a freelance journalist, and was previously an editor and correspondent at the Financial Times as well as the business and money editor at The i Newspaper. He is also the author of the Virgin Money Maker, the personal finance guide published by Virgin Books, and has written for the BBC, The Wall Street Journal, The Independent, South China Morning Post, TimeOut, Barron's and The Guardian. He is a graduate in Economics.
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