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(OCDO)
Ocado Retail Trading Update
25-May-2022 / 08:32 GMT/BST
Dissemination of a Regulatory Announcement, transmitted by EQS Group.
The issuer is solely responsible for the content of this announcement.
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OCADO GROUP PLC
25 May 2022
Ocado Retail Trading Update
Ocado Group (“Group”) has issued today a Trading Update for Ocado Retail
to coincide with the publication of the Marks & Spencer Full Year 2021
results which include Ocado Retail results to the end of Q1 2022.
Summary
Since the beginning of Q2, Ocado Retail has continued to win new customers
and grow market share online. The fundamentals of the business are strong
and Ocado Retail is confident that sales and EBITDA contribution will
follow an increasingly positive trajectory in the medium to long term.
This confidence is based on expectations of continuing customer
acquisition, the availability of capacity to meet future demand, and
encouraging trends in underlying productivity.
Like every consumer-facing business in the UK, however, Ocado Retail’s
short term sales growth reflects changing customer behaviour against the
background of a growing cost of living crisis.
In response to this, Ocado Retail is mobilising the ingenuity and
commitment of its colleagues, and the resilience of its business model, to
offer customers fair value and the highest quality service through this
challenging period.
Market backdrop
Since Ocado Retail’s Q1 trading update on the 17th of March, the trading
environment has deteriorated, as has been widely reported in industry
data, with the cost of living crisis compounding the impact of a return to
more normal consumer behaviours as restrictions have ended and many people
return to the office.
In the last few months, the grocery market has declined by 4-5% compared
to last year when the country was experiencing peak
COVID restrictions. Online grocery overall has declined by around 20%
compared with last year, although the online market remains 60-70% higher
compared with two years ago. Online share of grocery at 11-12% is almost
double compared to pre-pandemic levels.
Food price inflation and the value of the average basket
While Ocado Retail is committed to offering customers fair value, the
business also recognises the high cost inflation being experienced by food
suppliers and others in the grocery supply chain. Overall, food price
inflation in the average basket is trending in the low single digits. In
addition to the impact of the normalisation of consumer behaviours,
industry trends are increasingly impacted by the cost of living crisis in
the UK. Ocado Retail is seeing consumers ordering one or two fewer items
per shop than before and therefore the value of the average basket is
currently trending 9% lower compared to a year ago.
New customer acquisition
Over the week beginning the 9th of May, Ocado Retail delivered 400,000
orders to customers for the first time. However, although customer numbers
are growing (up 12% year-on-year, year to date), the rate of growth has
slowed as consumers respond to short term discounts and promotions. A
combination of slower growth in customer transactions, and a slightly
lower average basket, means that Ocado Retail sales were down around 8% in
Q2 in the period up to and including the 25th of April compared to a fall
of 5.7% reported in Q1.
Ocado Retail continues to see big pools of demand in the UK market for
online grocery services which, with new capacity coming on stream, it has
the opportunity to serve. Ocado Retail continues to show the strongest
growth in the online channel and is winning market share, according to
industry data.
Impact on ORL sales and EBITDA contribution
Given expectations that the effects of the cost of living crisis will
intensify, with a further rise in utility prices anticipated in the
autumn, Ocado Retail now expects that sales growth in FY22, while
positive, will nonetheless be in the low single digits rather than around
10%, to which we guided previously.
Slower than expected sales growth, coupled with the impact of higher
utility and fuel costs in the year, implies a low single digit EBITDA
margin for Ocado Retail in FY22.
Key indicators of efficiency in both fulfilment and the last mile continue
to show positive trends. Of particular note, units picked per labour hour
(“UPH”) in our newest sites, Andover and Purfleet, are exceeding our 200
UPH target, with Andover having hit 220 UPH. This gives the business
confidence that the EBITDA margin will recover towards a high mid-single
digit level over time as it recovers the fixed costs of new capacity and
when the impact of the current cost of living crisis begins to abate.
Separately, Ocado Group will be hosting an accounting seminar at 3pm BST
today to discuss the modelling of the business and to improve
understanding of the underlying operating segments. For those not
attending the presentation in person there will be a webcast link detailed
on the Press Release, and replay facilities made available, shortly after
the presentation, on the Group website, 1 OcadoGroup.com.
No additional material updates on current trading will be provided at the
event.
Contacts
• David Shriver, Director of Communications, Ocado Group on 020 7353
4200 today or 01707 228 000
• Martin Robinson at Tulchan Communications on 020 7353 4200
• Fraser Ramzan, Head of Investor Relations, Marks and Spencer Group
plc, on 0203884 7080
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 direct 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 M&S and Ocado own brand products and a growing 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.
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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ISIN: GB00B3MBS747
Category Code: TST
TIDM: OCDO
LEI Code: 213800LO8F61YB8MBC74
OAM Categories: 3.1. Additional regulated information required to be
disclosed under the laws of a Member State
Sequence No.: 164027
EQS News ID: 1360965
End of Announcement EQS News Service
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