Ocado sales drop by almost 6% as shopping habits return to normal

Retail revenues at Ocado have dropped by almost 6% in the first quarter of the financial year as grocery shopping habits return to normal following the surge in online shopping during the pandemic.

Retail sales for the 13 week period  to February 27 fell by 5.7%, to £564.7 million, despite customer numbers growing by 31% year-on-year, indicating a strong consumer appetite for the upmarket online grocery brand.

Ocado partly attributed this to the overall 4% dip in UK grocery market sales across the sector, while also noting a 15% drop in the average basket size, down to £124.

The business – which is a joint venture between Ocado Group and Marks & Spencer – said that “smaller baskets offset the increase in the number of customer transactions in the quarter”, which had increased by 12% to 367,500 orders.

It also highlighted that revenue was up 31.7% when compared against the same period two years ago, before the pandemic affected shopping patterns.

Significant increases in raw materials and other costs have added further challenges for the UK grocery industry and Ocado warned of price increases “where costs could not be mitigated”, moving them in line with the rest of the market.

It will continue to monitor the market to ensure alignment on prices.

Read more: “Online grocery is here to stay” claims Ocado boss

The group said that the cost of living increase made the scale of food price inflation this year “difficult to predict” and that uncertainties have increased significantly in recent weeks due to the war in Ukraine, the overall level of market demand and the continued return to pre-Covid shopping patterns.

As a result, full-year revenue growth in 2022 is now expected to be “closer to 10%”, despite being forecast to reach the mid-teens earlier this year.

Against this background, the group has continued to invest in a number of new hyper-efficient automated customer fulfilment centres, increasing capacity across the group as they continue to roll out.

A number of new Zoom facilities – which operate Ocado’s rapid delivery service – will also be opening over the next twelve months, expanding the offer to more locations.

“The last quarter has been encouraging for Ocado Retail despite the clearly evident challenges the industry and consumers are facing,” said CEO Melanie Smith.

“Of course, as we have seen since the end of Covid restrictions, the value of the average basket and shape of the week continue to normalise as we return towards the rhythm of our pre-Covid lives.

“Long term, we are confident that the trajectory of growth remains positive.”

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