REG - Ocado Group PLC - Trading Statement

OcadoAnnouncement

17/03/2022 07:00

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RNS Number : 0601F  Ocado Group PLC  17 March 2022

 

OCADO GROUP PLC

 

17 March 2022

Ocado Retail Q1 Trading Statement

Strong growth in customer numbers underpins confidence in long term demand

Ocado Retail Ltd ("Ocado"), a joint venture between Ocado Group plc ("Ocado
Group") and Marks & Spencer Group plc ("M&S"), today announces its
trading statement for the 13 weeks to 27th February 2022.

 

Highlights

 

●    Active customer numbers grew 31% year-on-year to 835,000

●    Customer orders grew by 11.6% reflecting strong customer acquisition
and despite the tail-end impact of labour shortages early in the quarter

●    Average basket size of £124, 15% lower than last year as customer
behaviours return towards pre-Covid levels, reflecting the continued easing of
pandemic restrictions and return to more in-office working

●    Revenue down 5.7% in the quarter, up 31.7% v Q1 2020, against a
challenging comparative and a 4% fall in UK grocery market sales

●    The shape of demand in the week continues to reflect the return
towards the peaks and troughs of pre-COVID customer behaviours

●    Against this background, our capacity roll-out is on track, with
Bicester CFC bringing a further 30k OPW in the second half, taking total CFC
capacity at live sites, at maturity, for Ocado Retail to over 630k OPW by the
end of the year

●    Next Zoom site to open in Canning Town this Spring, and 3 further
sites to be opened over the next year

 

 

Key financials

 

                             13 weeks  13 weeks  Growth(4)

                             Q1 2022   Q1 2021

 Retail Revenue(1)           £564.7m   £599.1m   (5.7%)
 Average orders per week(2)  367,500   329,300   11.6%

 

 

Melanie Smith, Ocado Retail's Chief Executive Officer, said:

 

"Our thoughts today, and every day, are with the Ukrainian people, and
everyone impacted by Russia's invasion of their country. The human tragedy
unfolding in Ukraine, and the refugee crisis along its borders, has shocked
the world. Ocado Retail has contributed £150,000 to the DEC Ukraine Crisis
Appeal to help provide food, first aid, shelter, medicine, clothes and other
aid to those most in need.

 

The last quarter has been encouraging for Ocado Retail despite the clearly
evident challenges the industry and consumers are facing. Active customers
have increased by 31%, demonstrating the continued strong appetite for Ocado's
unique and market-leading brand of online grocery. 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. Given that we are comparing a post-lockdown quarter this year
with a lockdown quarter last year, this has meant that sales were down 5.7% in
the quarter, not helped by the softening market overall, with smaller baskets
offsetting the increase in the number of customer transactions in the
quarter.

 

Long term, we are confident that the trajectory of growth remains positive.
That growth is underpinned by our quality customer service and high customer
satisfaction (we were recently named Which UK's recommended online
supermarket) and enabled by our investment in new hyper-efficient automated
customer fulfilment centres which bring wide ranges, the freshest produce, and
the best on-time delivery in the market, all at fair value, across the full
range of price points, to our fast growing number of UK customers."

 

The trading environment

 

Significant increases in raw materials and product cost prices, energy,
utilities, and dry ice through Q1 have added further cost headwinds for the
grocery industry in the UK. Reflecting these challenges, industry data reports
that food prices have increased by 4.3% in February, the fastest rate of
increase since 2013.  Against this backdrop the UK grocery market overall was
4% lower in Q1 than the same period last year. Ocado Retail has been working
closely with suppliers where appropriate to actively manage this level of
inflation. The business has moved certain retail prices, where costs could not
be mitigated, in line with the rest of the market and will continue to monitor
the market to ensure alignment on prices and delivery of fair value to
customers.

 

Customer growth

 

We have grown our active customer base by 31% YoY to 835k active customers.
Customers have more choice than ever before when it comes to where they can
spend on groceries. We continue to focus on delivering the widest range,
excellent value and best-in-class service. Notwithstanding previously
highlighted labour constraints, which impacted our ability to add new slots
earlier in the quarter, we have acquired 108k new customers (more than double
versus the same quarter in FY21), which demonstrates continued growing demand
for online grocery and Ocado's services.

 

New capacity

 

The Bicester customer fulfilment centre will be opened this year, adding 30k
orders per week at maximum capacity. New sites opened in FY21 continue to ramp
up, with Purfleet and Andover now operating at over 40k and 25k orders per
week respectively, around half their end game capacities. A new Zoom facility
in Canning Town will be opened in the Spring, with more sites following over
the next twelve months, expanding our unique Zoom proposition (with a
dramatically more extensive range and higher average basket versus Q-Commerce)
to more locations.

 

FY22 Outlook

 

The scale of food price inflation over the course of this year, coupled with
the overall level of market demand as the cost of living increases,
particularly rising energy costs, is difficult to predict. We intend to
continue to offer the best possible value to customers while recognising the
overall level of pricing in the market. These uncertainties over inflation,
which 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, mean that while easier comparatives, strong customer
demand, and further growth in capacity, should see revenue growth end the year
in the high-teens, the full-year growth rate may be closer to 10%.

 

EBITDA margins will reflect the same key factors as those outlined in the Q4
Trading Statement, and may be further impacted by the significant increases in
energy costs where uncertainty remains. To offset this impact, we are
undertaking a series of mitigating cost measures across the Group.

 

Ocado Group, on behalf of the joint-venture, will be hosting an analyst
conference call at 7.30am today. Please use participant number: +44 (0)330 336
9601 and confirmation code: 9718329. A replay facility will be available
through an on demand link for 90 days following the announcement.

 

Contacts

●     Stephen Daintith, Chief Financial Officer, Ocado Group plc, on
01707 228 000

●     David Shriver, Director of Communications, Ocado Group plc, on
01707 228 000

●     Fraser Ramzan, Head of Investor Relations, Marks and Spencer Group
plc, on 0203884 7080

●     Martin Robinson at Tulchan Communications on 020 7353 4200

 

About Ocado Retail

 

Online supermarket Ocado.com was established in 2000 and is one of Britain's
leading online retailers, now a 50:50 joint venture between Ocado Group and
Marks & Spencer Group plc. Covering geographies comprising over 74% of UK
households, every shopping bag is carefully packed in one of six distribution
centres using market leading software and technology. Shopping is then
delivered directly to customers using a network of regional spokes in
brightly-coloured vans. With award-winning mobile apps, Ocado Retail delivers
over 50,000 products, including big-name brands, a range of Ocado own brand
products and a non-food selection. Thoughtful service features such as
colour-coded bags, digital receipts provided in date order, reminder texts
with your driver's name, along with convenient hourly delivery slots
complementing award-winning customer service on email, phone and social media.

 

Notes

1.         Retail revenue comprises revenues from Ocado.com and Ocado
Zoom and excludes revenues from Fetch in current and prior periods

2.         Average orders per week refers to results of Ocado.com.

3.         Average basket size refers to results of Ocado.com.

4.         Growth percentage calculated on a rounded basis.

5.         The figures used in this announcement are unaudited.

6.         A copy of this trading update is available on
www.ocadogroup.com (http://www.ocadogroup.com) and
www.corporate.marksandspencer.com.

 

Cautionary statement

Certain statements made in this announcement are forward-looking statements.
Such statements are based on current expectations and assumptions and are
subject to a number of risks and uncertainties that could cause actual events
or results to differ materially from any expected future events or results
expressed or implied in these forward-looking statements. Persons receiving
this announcement should not place undue reliance on forward-looking
statements. Unless otherwise required by applicable law, regulation or
accounting standard, Ocado does not undertake to update or revise any
forward-looking statements, whether as a result of new information, future
developments or otherwise.

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