Upmarket grocer Ocado has reported a 7.2 per cent surge in revenues to £569.6m in the third quarter as turnaround plans under the guidance of its year old chief executive appear to show signs of paying off.
The digital supermarket, which operates as a joint venture with M&S, said the average orders per week at Ocado grew 1.9 per cent year-on-year, following a series of price cuts on hundreds of items which enticed customers amid the cost of living crisis.
The number of mature customers – defined as those who have made a fifth shop at Ocado- grew 6.6 per cent.
Ocado’s grocery arm has suffered in recent years, as its door delivery service proved popular with customers when lockdown rules were in place but since restrictions have lifted demand has faded.
This is the second revenue hike the company has posted this year, revealing a 3.4 per cent rise in earnings to £584m this year in the first quarter.
That has given its long-embattled share price a 20 per cent plus bump this year.
The retail arm’s new chief executive, Hannah Gibson, has been rolling out a ‘perfect execution’ strategy, which has been focused on boosting customer numbers and cutting losses.
Gibson said: “It has now been a year since I joined Ocado Retail and in January we set out our Perfect Execution strategy, making sure every element of our customer proposition and our operating model is at its best.
“We are delivering on this plan and have great momentum in the business, with revenue growing faster in Q3 than in H1 and a return to positive volume growth in the last month of the quarter.
“The continued progress in Q3 underpins our confidence in delivering our FY23 guidance of mid-single digit revenue growth and full year profitability, and we have started the final quarter positively.”
Ocado’s share price rose 3.25 per cent this morning following the news.
Russ Mould, investment director at AJ Bell, said: “Things are looking up for Ocado’s joint venture with Marks & Spencer. It is seeing a higher number of average orders per week, there is a bigger pool of active users, and the average basket value has improved.”
“However, the average basket size is still shrinking, which means it is not a full house for Ocado in terms of progress. While the overall gains are not enough to move the dial for group earnings, with guidance unchanged, the market has focused on the positives and the share price was up 2% this morning.
He added: “The M&S joint venture was never broken; it was simply stuck in the mud. Nonetheless, this retail business is effectively its shop window for prospective grocery clients.
“If Ocado wants to convince more grocers to use its logistics platform and systems, its JV with M&S needs to be operating flawlessly. So, the more trading updates it can issue such as the latest one, the better it looks in future client negotiations.”