12th Mar 2014 08:57
LONDON (Alliance News) - Online grocery retailer Ocado Group PLC Wednesday said group gross sales rose 23% in the first trading quarter of its new financial year, boosted by double-digit growth in the number of average orders per week and the launch of its delivery services for Wm Morrison Supermarkets PLC's fledgling online business.
For the 12 weeks to February 23, Ocado said group gross retail sales increased by 23% to GBP227.5 million, up from GBP185.5 million for the same period a year earlier, driven by an 18% increase in average orders per week to 155,152 from 130,995 the prior year. It said that average order size in the period fell by 0.4% to GBP117.53, compared with GBP117.99.
"While we are encouraged by our current trading, the retail environment remains both challenging and competitive, and we expect to continue growing in line with, or slightly ahead of, the market," said Chief Executive Officer Tim Steiner in a statement.
The group said that at the end of the period it held cash and cash equivalents of GBP102.3 million and had external borrowings of GBP46.6 million.
The UK online grocery distribution business is still to make it first statutory profit and has been subject to a lot of skepticism over the years about the future of the company and its growth trajectory.
For the year ended December 1, 2013, Ocado's losses widened significantly, reporting a pretax loss of GBP12.5 million, compared with a pretax loss of only GBP0.6 million a year earlier, as the group continued to pump money into the business.
In that year it booked a total of GBP7.4 million in exceptional items, including costs relating to the pre-opening costs for its new customer fulfilment centre in Dordon and its first dedicated non-food distribution centre opened in Welwyn Garden City to support continued growth of non-food business.
Ocado recently launched a joint venture partnership with Morrisons, the UK's fourth-largest supermarket chain, to act as a delivery partner for a grocer that has lagged behind its rivals online. Under the long-term deal Ocado provides the delivery logistics for Morrisons. Morrisons launched its online food business at the end of December with the help of Ocado and started deliveries across the Midlands on January 10, hoping to reach half of UK households by the end of the year.
After the release of its full-year results on February 4, Ocado Chief Executive Officer Tim Steiner told journalists that "2014 is about bedding down Morrisons".
"Having a successful launch for our first business-to-business customers is incredibly important and is a priority. We are spending a lot of time and money on the whole business," he said.
Ocado has been expanding capacity significantly, one of the reasons behind the delay in making a profit.
By the end of the current financial year, Steiner told journalists in February that there will be GBP1.3 billion in spending on new capacity for the Ocado business, and GBP500 million for the Morrison business.
Last month, Ocado Group said Co-Founder Jason Gissing sold 3.1 million shares at a price of GBP498.75 per share, in a deal worth approximately GBP15.2 million on February 6. Gissing continues to hold 15 million shares, which represents 2.58% of the online grocery company's issued share capital. Gissing is retiring from the board and will leave the company at the annual general meeting in May.
Shares in Ocado were trading 1.5% lower at 563.25 pence per share in early trading Wednesday.
By Rowena Harris-Doughty; [email protected]; @rharrisdoughty
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