Ocado posts strong results - but the company is worried about the ongoing supermarket price war

Helen Cahill
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20th Anniversary Of First Online Sale
The home delivery service is one of the many under pressure from the discounters (Source: Getty)

Ocado, the food delivery service, celebrated a positive set of results today but said the supermarket price war will drag on for some time.

The group's share price slumped nine per cent in early trading on the news.

The figures

Sales at the group were up 15.4 per cent, reaching £314m for the 12 weeks to 7 August.

Ocado's retail sales also increased, up 13.6 per cent to £286.4m, as compared to £252m for the same period last year.

12 September 2016 @ 4:30pmOcado Group (OCDO)

The food delivery service said the average number of orders per week jumped 18.9 per cent, up to 226,000 this year from 190,000 during the same period in 2015.

Why it's interesting

Ocado's chief executive, Tim Steiner, said today that the company is wrestling with "continuing margin pressure" that he doesn't see letting up in the near future. Ocado, and many other middle-market food suppliers, is being hit particularly hard by the supermarket price war driven by the discount supermarkets such as Aldi and Lidl.

Read more: Ocadon't: Half of us shun online shopping

The group recently finalised a deal with Morrisons to help the retailer with its online distribution; Ocado is giving Morrisons capacity in its Kent warehouse, and will be providing software support.

What Ocado said

Steiner said: "As the market remains very competitive, we are seeing sustained and continuing margin pressure and there is nothing to suggest that this will change in the short-term. However Ocado's combination of choice, competitive pricing, and industry-leading service has contributed to an increase in average orders by nearly 19 per cent, our best volume performance in more than five years."