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REG- Ocado Retail Trading Update

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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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