Ocado predicts lower sales as shoppers seek more budget items

Ocado predicts weaker sales as cost of living crisis pushes shoppers to opt for budget items and smaller orders

  • Average basket size fell 6% to £116 in the 13 weeks to August 28
  • Ocado still managed to boost third quarter retail revenue by 2.7% to £531.5m
  • Due to accelerating energy costs, Ocado is looking for alternatives to dry ice

Ocado’s retail sales are expected to fall this year as demand for groceries from Britons shifts towards more profitable items and smaller orders.

The online retailer said soaring energy costs and other inflationary pressures led to more customers ordering smaller baskets and cheaper products, including from its own range.

Transactions averaged £116 in the 13 weeks to August 28, down 6% from the equivalent period in 2021, with a particularly noticeable drop towards the end of the quarter.

The online retailer said soaring energy costs and other growing inflationary pressures led to more customers ordering smaller quantities and cheaper products.

Thanks to the surge in customer transactions and higher prices, the company’s retail division, a joint venture with Marks & Spencer, still managed to increase revenue by 2.7% to 531, £5 million.

But while Ocado predicts “even stronger growth” in demand in the fourth quarter, he thinks that will not be enough to prevent the drop in revenues for the year as a whole.

He further expects earnings to be impacted by significant cost headwinds, with electricity prices more than three times higher than last year and a 15% increase in fuel.

Due to soaring energy prices, the Hatfield-based firm is also looking at alternatives to dry ice, commonly used to chill frozen food, which it says will add a further £15-20million in annualized costs.

Managing Director Tim Steiner said: “We remain focused on providing Ocado Retail customers with the best possible value to help them through the cost of living crisis, and we are encouraged by the positive underlying trends. of the business.”

Ocado group shares plunged 10.7% to £7.10 in early trading after today’s trade update, making it the biggest drop for the FTSE 350 index.

Over the past 12 months, their value has fallen by around 58%, having more than doubled in the first year of the pandemic when lockdown restrictions encouraged more people to shop online.

Trade slowed as Britons returned to department stores, but the business still attracted a record 946,000 customers in the third quarter, helping to generate an average of 374,000 orders per week.

To meet growing demand, Ocado has opened four fulfillment centers since the start of 2021, giving it a total capacity of up to 600,000 weekly orders, as well as a “Zoom facility” in the neighborhood. Londoner from Canning Town.

The latter site is part of the group’s recently launched ‘Zoom by Ocado’ delivery service, through which customers in parts of the English capital can receive up to 10,000 products within an hour of ordering.

Another such warehouse has just opened in Leyton, east London, while two more are expected to open in the next six months in other cities across the UK.

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