19th Sep 2023 10:43
(Alliance News) - Investors were pleased with Ocado Group PLC's trading update on Tuesday, after it said revenue grew in the third quarter as order and customer numbers increased.
On Tuesday, Ocado Retail Ltd, a joint venture between Ocado Group and Marks & Spencer Group PLC announced its trading statement for the 13 weeks to August 27.
"Things are looking up for Ocado's joint venture with Marks & Spencer. It is seeing a higher number of average orders per week, there is a bigger pool of active users, and the average basket value has improved," said AJ Bell's Russ Mould.
The Hertfordshire-based online grocer and warehouse technology firm reported that revenue in its third quarter was GBP569.6 million, increasing 7.2% from GBP531.5 million the year prior.
The firm said average orders increased 1.9% to 381,000 per week, from 374,000 a year prior.
Average customers also grew 1.5% to 961,000, from 946,000, while the average basket value rose 4.2% to GBP120.72, from GBP115.85.
Speaking about average orders and active customers, Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown, said the figures are "not too bad considering there were big acquisition efforts this time last year, but it's a trend that will need to be watched from here to make sure this isn't a protracted bout of sluggishness."
The firm said its "perfect execution programme" and "Big Price Drop" campaign have strengthened its customer proposition.
However, Ocado said the average basket size fell by 3.9% to 44 items from 45. Mould said that this "means it is not a full house for Ocado in terms of progress."
"While the overall gains are not enough to move the dial for group earnings, with guidance unchanged, the market has focused on the positives and the share price was up 2% this morning," Mould added.
Looking ahead, Ocado maintained its guidance from February, expecting mid-single digit revenue growth for the full-year and positive earnings before interest, tax, depreciation and amortisation.
Chief Executive Hannah Gibson said: "It has now been a year since I joined Ocado Retail 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.
HL's Lund Yates said that "All attention now turns to the final quarter, where festive trading starts to ramp up and this should give a clear indication into the consumer confidence of Ocado customers, and settle the debate about how resilient Ocado's offering really is – with volumes taking centre stage."
Meanwhile, AJ Bell's Mould said: "If Ocado wants to convince more grocers to use its logistics platform and systems, its JV with M&S needs to be operating flawlessly.
"So, the more trading updates it can issue such as the latest one, the better it looks in future client negotiations."
Ocado shares rose 3.4% to 813.80 each on Tuesday morning in London.
By Sophie Rose, Alliance News reporter
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