Slow growth at Ocado fails to impress investors

By Jo Gilbert

Published: 08 December, 2016

The future is still uncertain for online grocer Ocado which has just released its final quarterly sales figures for 2016.

Ocado's results released this morning (December 8) showed a rise in retail sales up 13.1% in the 16 weeks to November 27 compared to the same period the year before.

Retail sales were down compared to Q3 which saw 13.6% growth in the 12 weeks to 7 August 2016.

However, the retailer, which has a dedicated wine cellar, shows some signs of recovery from June, when the chain saw its shares plummet to a three-year low in the wake of the launch of rival online delivery service Amazon Fresh.

Although sales are in the black, the marginal growth is unlikely to impress investors.

"Once again Ocado couldn't satisfy investors' appetites, the online supermarket's 13.1% rise in retail sales (to £398.1 million) leading to a 1%-plus fall after the bell," Connor Campbell, from Spreadex, said.

"That is perhaps because it marks yet another retail sales growth slowdown quarter-on-quarter, something that isn't going assuage investors' constant fears about the impact of Amazon Fresh."

Following the launch of AmazonFresh in June, Ocado's share price dropped to a three-year low, prompting predictions of a takeover by Jeff Bezos' retail giant.

Ocado has also come under pressure in the on-going price war sparked by the rise of German duo Aldi and Lidl.

Chief executive Tim Steiner was cautioned over the group's profit margins in the last trading update.

In quarter four, average orders per week grew 17.6% to 241,000 and sales rose 13.6 percent over the last 12 months.

However, average basket size decreased by 2.9%, attributed to Ocado's smart pass that allows customers to shop for less more frequently.

"We are very pleased with the financial performance achieved this year," Steiner said.

"The strong growth in sales and order volumes reflects the attractiveness of our retail offer to customers. During the period, we were also pleased to announce that we have commenced operations at our Andover CFC.

"This is the first of our CFCs to use our new proprietary infrastructure equipment solution and software, which will support the ongoing growth of our business."

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