Ocado sales up 25pc

Online grocer Ocado posted a 25 per cent rise in first-quarter sales and said it remained profitable, despite a challenging economic backdrop which has hit many retailers hard.

The group, which mostly sells the products of grocer Waitrose, said it made gross sales of £146.2m in the 12 weeks to 20 February, in line with the trend reported at annual results last month.

"Despite the economic headwinds in the UK, more and more consumers are seeing the benefits of online grocery shopping and we are increasing capacity to meet this demand," Chief executive Tim Steiner said.

Many retailers are struggling as shoppers face higher energy and food prices and worry about rising interest rates and job security as the government cuts public spending.

Ocado has said capacity constraints at its distribution centre in Hatfield are its main brake on growth.

It is investing to increase capacity to 180,000 orders per week, up from a maximum of around 124,000 in the first quarter and also building a new distribution centre for the end of 2012.

Ocado shares have been on a rollercoaster ride since listing at 180 pence in July.

After dropping to 120.9 pence last year, they rallied to as high as 290 pence this year as the group announced its first quarterly pretax profit and speculation swirled it might become a bid target for a British grocer or US group Amazon.

They have since fallen back after the pension fund of retailer John Lewis, the parent company of Waitrose, sold its ten per cent stake in the business and Waitrose stepped up investment in its own online business.