Ocado’s sales rise as ‘ big price drop’ campaign and joint venture with M&S bear fruit
- Ocado has reported higher sales amid its price cut campaign this summer
- Shares edged higher on Tuesday morning and are up 26% year-to-date
Ocado has reported a pick-up in sales as price cuts tempted shoppers back over the summer months.
The online grocer said sales grew 7.2 per cent to £569.9million in the third quarter, with a return to positive volume growth in August in its retail business which is run as a joint venture with M&S.
The pick-up in sales coincided with the launch of Ocado’s ‘big price drop’ campaign ahead of the return to school.
Bearing fruit: Ocado retail sales rose over the summer months amid price cut campaign
Prices rose 8.4 per cent on average during the third quarter but Ocado said this still remained ‘considerably’ below wider grocery inflation.
Shares in Ocado are up 3.2 per cent on Tuesday morning to 812.2p, having gained 26 per cent in the year-to-date.
Average orders per week grew 1.9 per cent year-on-year to 381,000, while active customers grew 1.5 per cent to 961,000.
The average basket value was up 4.2 per cent from the same period last year, to £120.72 and an average of 44 items.
Hannah Gibson, chief executive of Ocado Retail, said: ‘It has now been a year since I joined Ocado and in January we set out our “perfect execution” strategy, making sure every element of our customer proposition and our operating model is at its best.
‘We are delivering on this plan and have great momentum in the business, with revenue growing faster in Q3 than in H1 and a return to positive volume growth in the last month of the quarter.’
Ocado reiterated its guidance that it would swing to a full-year profit, with ‘marginally positive’ underlying earnings.
Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown said: ‘A tentative return to volume growth suggests consumers are showing resilience.
‘Ocado isn’t the cheapest offering around, despite big investments in dropping prices.
‘This shows the power of getting the proposition right, which has included ironing out concerns about the placement and promotion of M&S products.
‘This higher end of the market is more insulated from economic trouble, but it certainly isn’t immune.
‘The fact that price increases of around 8 per cent are so far below the rate of grocery inflation, and the difficult volume trends of late, shows that Ocado customers are only willing to stomach a certain degree of price increases.
‘Starting near the top of the price spectrum leaves far less room for manoeuvre.’