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Sep 15, 2020

News | Business | British Online Grocery: Ocado sales surge amid shift to online shopping

 3 minutes - Source: BBC


Ocado delivery driver Image copyright PAUL ELLIS/AFP VIA GETTY IMAGES

Online grocer Ocado saw its sales rocket more than 50% in the third quarter of the year as more people shopped online in lockdown.

Sales at Ocado Retail, its joint venture with Marks & Spencer, and previously Waitrose, were £587.3m in the 13 weeks to 30 August.

The firm said growth was stronger than in the second quarter, while weekly orders stood at 345,000, up almost 10%.

But it said uncertainties remained over the "ongoing impact" of the pandemic.

The firm's switch to delivering M&S products on 1 September got off to a rocky start, with the retailer having to cancel some orders owing to high demand.

It also temporarily halted deliveries to staff members to help clear an order backlog.

However, on Tuesday, the grocer explained that because of excitement over the partnership, the launch day had been its biggest forward order day to date. Average shopper baskets have also increased by about five items since it began offering M&S goods.

The firm, which booked a pre-tax loss of £214.5m in 2019, said it expected strong underlying earnings of £40m this year because of continued demand.

Melanie Smith, Ocado Retail's chief executive, said: "Our aim is to continue to set the bar as we begin again to welcome new customers who are seeing the benefits of online shopping in ever greater numbers and we remain focused and on track to increase capacity by 40% through to 2021."

M&S boost?

Analysts said the results were not only promising for Ocado, but also for M&S, which bought a 50% stake in the Ocado Retail business for £750m last year.

Some warned the business had overpaid at a time when its business was struggling.

Sophie Lund-Yates, an equity analyst at Hargreaves Lansdown, said: "This could bode well for Marks & Spencer, whose sales could do with a boost, and who staked a lot on this deal paying off.

"98% of customers are already shopping at M&S, though, so it will be interesting to see how many of these sales will have simply transferred from stores."

Ocado has said the recent shift to online shopping could mean a "permanent redrawing" of the retail landscape.

"The world as we know it has changed," chief executive Tim Steiner said in July.

"As a result of Covid-19, we have seen years of growth in the online grocery market condensed into a matter of months; and we won't be going back."

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