Ocado lowers growth forecast amid drop in Q1 sales

Ocado Retail Ltd has announced its revenues dropped 5.7% year-on-year in the 13 weeks to 27 February 2022 (Q1) to £564.7m, and the group said that while revenue growth for the year should be in the high-teens, the forecast has dropped to 10%.

The announcement comes amid uncertainties over inflation which have increased in recent weeks due to the war in Ukraine, the overall level of market demand, and the continued return to pre-Covid shopping patterns.

UK grocery market sales also fell 4% and the average basket size was £124, which is 15% lower compared to last year, as customer behaviours return towards pre-Covid levels following the easing of pandemic restrictions and the return to in-office working.

Ocado said that it has suffered with “significant” industry wide increases in raw materials and product cost prices, energy, utilities, and dry ice through Q1, with food prices increasing by 4.3% in February, the fastest rate of increase since 2013.

However, customer orders grew by 11.6% which Ocado said reflects “strong” customer acquisition and despite the impact of labour shortages early in the quarter.

Active customer numbers also increased by 31% year-on-year to 835,000, with Ocado having acquired 108k new customers which is more than double from the same quarter in FY21.

Against this background, Ocado said its capacity roll-out is on track, with Bicester CFC bringing a further 30k OPW in the second half. Additionally, its next Zoom site is set to open in Canning Town this spring, and three further sites are to be opened over the next year.

Following the ongoing crisis in Ukraine, Ocado Retail has contributed £150k to the DEC Ukraine Crisis Appeal to help provide food, first aid, shelter, medicine, clothes and other aid.

Melanie Smith, Ocado Retail’s chief executive officer, said: “Our thoughts today, and every day, are with the Ukrainian people, and everyone impacted by Russia’s invasion of their country. The human tragedy unfolding in Ukraine, and the refugee crisis along its borders, has shocked the world.

“Given that we are comparing a post-lockdown quarter this year with a lockdown quarter last year, this has meant that sales were down 5.7% in the quarter, not helped by the softening market overall, with smaller baskets offsetting the increase in the number of customer transactions in the quarter.”

She added: “Long term, we are confident that the trajectory of growth remains positive.”