UK-based online retailer Ocado has recorded a sales growth of 11.7% in the first quarter of 2018, despite a sales dent as a result of the recent adverse weather conditions.
The retailer recorded revenue of £363.4 million during the 13-week period to 4 March 2018, despite the ‘Beast from the East’ holding back sales during the final week.
Ocado’s average orders per week rose 11.1% to 280,000 compared to the same period last year, although the average order size decreased by 0.4% to £110.45.
"We are pleased to report another quarter of strong underlying sales growth in our retail business in line with our guidance for the year," said Tim Steiner, Ocado's chief executive.
"The reported rate of retail revenue growth over the quarter was broadly the same as in Q4 2017 as we operated at maximum capacity for most of the quarter and were impacted by the winter storms that caused widespread disruption during the final week."
Sales Slowdown
Even when taking the recent weather conditions into account, Ocado’s sales growth is showing signs of slowing, according to Molly Johnson-Jones, senior retail analyst at GlobalData.
"Although slowing growth is to be expected with a large, consistently high growth business in a maturing market, the reasons for it are a concern," she said.
"Average order size has fallen 0.4% over the quarter despite inflation predicted to have remained at 2.8%. As order size decreases, profitability of baskets also decreases, and as Ocado is already a low margin business facing continuing input cost pressures, we anticipate that profitability will have fallen again this quarter."
She added that these problems are “cyclical rather than systemic”, and that Ocado is “well placed” to take advantage of future growth, as a result of its continued investment in fulfilment and international partnerships.
Looking Ahead
For the company’s outlook, Steiner said that Ocado is making good progress on its new customer fulfilment centre in Andover, and is on schedule to open its newest facility in Erith in the middle of 2018.
During a St Patrick’s Day visit last week, Minister for Agriculture, Food and the Marine, Michael Creed, T.D., and the Irish Food Board Bord Bia’s CEO Tara McCarthy met with Ocado’s Tim Steiner.
The Irish envoy underlined the strategic importance of the Irish food and drink industry as a sustainable partner and supplier to the UK as well as to unlock further commercial opportunities.
Ocado confirmed that it will send representatives to Bord Bia’s Marketplace International event next month where they will meet new and existing suppliers.
Speaking at the visit, McCarthy emphasised the importance of top-to-top engagement which assists the Food Board to copper-fasten relationships at a senior level with key customers such as Ocado.
“Bord Bia is delighted with the commitment demonstrated by Ocado to Irish food and drink which has delivered significant commercial success for exporters," she said. "Our relationship with Ocado, which stretches back over ten years, has included the launch of a dedicated Irish shop section and a significant programme of business development events assisting Irish suppliers to build their business with Ocado and introducing a wider Irish product portfolio to Ocado’s customers”.
© 2018 - Checkout Magazine by Kevin Duggan
