Tuesday 10 March 2015 3:43 am

Ocado sales jump 19.2 per cent as company says it expects to keep growing ahead of the curve

The figures

Ocado’s group sales jumped 19.2 per cent in the 12 weeks to 22 February, rising to £271.1m, from £227.5m during the same period last year.

Meanwhile, retail sales were up a similarly impressive 15.2 per cent to £252.0m, two months after the company reported its first profit. Ocado said that on 22 February it had £77.7m in cash holdings and debts of £44.7m

Sales volume was up too – Ocado reported an average of 183,000 orders a week during the period – but the average cost of an order fell to £114.72, from £117.53, reflecting the continuing deflation of food prices. The drop ion average prices is likely also linked to Ocado's partnership with Morrisons, which is viewed as less of a luxury grocer than Waitrose, Ocado's original partner.

Morrisons, along with Tesco, Asda and Sainsbury's, is embroiled in a pitched battle for market share with Aldi and Lidl, both of which price their stock extremely competitively. 

Despite a competitive market, Ocado said it hoped to continue growing faster than its online grocery competitors. Phil Dorrell, director of retail consultants at Retail Remedy, was bullish in his analysis.

Growth continues to be solid in a brutally competitive market. The reason is a service level and quality kudos that other grocers often miss. 
The current growth trajectory is vey solid and he must be looking at other markets as the UK demography reaches its natural limit.

Why it’s interesting

Ocado’s chief executive, Tim Steiner, could land £26m in share bonuses if Ocado continues to outperform the market over the next five years. Steiner, an ex-Goldman Sachs banker, invested £1m in the company back in 2000 along with three other investors.

Ocado first made a profit in February this year, but Steiner said that was not the company’s main interest. He told the Guardian:

We’re not sitting here popping open the champagne. We may or may not [book a profit this year]. It’s not our primary focus to make short-term profit. We are focused on long-term shareholder value.

What Ocado said

On the quarterly figures, Steiner commented:

Our business continued to grow, against a backdrop of a retail market that remains challenging and competitive.

We remain committed to improving the quality of the proposition to customers, which we believe will support further growth.

Notwithstanding the uncertainty that remains in the marketplace, we expect to continue growing slightly ahead of the online grocery market.

In short

To keep growing above the curve, Ocado faces a struggle. The grocery market place is becoming increasingly crowded and competitive, which is great for consumers but tough on retailers. Ocado has made itself something of a niche within the market, but how it manages to maintain and develop that will ultimately be the key to its success.