26th Mar 2024 10:47
(Alliance News) - The turnaround at Ocado Retail Ltd appears to be "bearing fruit" despite a "fractious" relationship between the two partners, AJ Bell's Investment Director Russ Mould said on Tuesday.
The online-only grocer, a joint venture between Ocado Group PLC and Marks & Spencer Group PLC, said sales in the 13 weeks to March 3 rose 11% to GBP645.3 million from GBP583.7 million a year before.
Shares in Ocado Group leapt 8.4% to 490.90 pence in London on Tuesday. M&S was 1.7% higher at 258.50p in London.
Sales volumes increased 8.1% to 242.1 million items from 223.9 million with the average orders per week rising to 414,000 from 382,000, up 8.4%.
Active customers topped the 1 million mark, rising 6.4% to 1.02 million from 957,000.
The average basket value increased by 2.1% to GBP125.47 from GBP122.94.
Ocado Retail Chief Executive Officer, Hannah Gibson, said: "We have made a strong start to the year."
Gibson added there's "still so much more we can" and looked forward to "raising the bar even further in 2024."
Earlier in March, Ocado Group threatened to sue M&S over the final payment in the joint venture.
The two firms are at loggerheads over payments linked to undisclosed performance targets.
AJ Bell's Mould said: "Any joint enterprise doesn’t have the best prospects if participants are at odds with each other, but the Ocado Retail venture has enjoyed a robust period of trading despite the differences between partners Marks & Spencer and online groceries specialist Ocado."
"Sales were up and not just because of rising prices. The venture is actually seeing significant volume growth as it wins market share. This is partly because it saw less price inflation than the wider market," he noted.
Mould explained the positive trading comes after a long period of disappointing performance and "you can understand Marks & Spencer’s frustration – when it agreed the tie-up with Ocado in 2019 it set targets which have subsequently not been met."
"Ocado has threatened legal action over an outstanding, performance-dependent instalment in the GBP750 million agreement. Its chief executive Tim Steiner says Covid should be a factor when judging the performance. While there were obviously challenges relating to lockdown, the whole online groceries space received a significant boost in demand thanks to the pandemic," Mould pointed out.
But Mould noted at least the turnaround efforts appear to be "bearing fruit."
However, whether Marks & Spencer will continue its arrangement with Ocado has to be open to question given the somewhat fractious relationship, he suggested.
By Jeremy Cutler, Alliance News reporter
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