Ocado sticks by earnings outlook as retail sales rise

The group’s retail arm, which is run as a joint venture with high street giant Marks & Spencer, delivered a 3.4% rise in revenues to £583.7 million over the 13 weeks to February 26.

But with price inflation stripped out, sales by volume are still falling, with customers also buying less per shop as they return to pre-Covid shopping habits.

It said average basket sizes fell 7.5% to 45 items, offset by an 8.3% surge in average selling prices amid surging food inflation, leaving the overall basket value flat.

The group added that order frequency has returned to levels seen before the pandemic struck.

Average orders per week at Ocado.com lifted 3.6% to 381,000.

Ocado stuck to its full-year guidance, reiterating that it expects the retail business to remain loss-making in its first half, but hopes to swing out of the red by the year end as sales growth recovers, leaving it with marginal underlying earnings growth for the full year.

Ocado Retail chief executive Hannah Gibson said: “While the trading environment remains challenging, we expect to build momentum through the second half of the year.

“This solid 2023 performance will enable us to return to sales growth and profitability.”

The group is forecasting mid-single digit retail sales growth over the full year, “reflecting a return to volume growth as the challenging comparison to larger volume basket shopping behaviours that remained in early 2022 fades”.

Ocado revealed last month that losses widened across the wider group to £501 million in 2022 from £177 million in 2021, with its retail business swinging to an underlying loss of £4 million.

It was hit by a cutback in customer spending per shop as well as soaring cost pressures, which took their toll on its bottom line.

But it said in its latest update that more customers are shopping with the group, with a 13.8% increase in active customers to 951,000 at the end of its first quarter.