Composite picture of green grocery products sold on Ocado

Source: Ocado

On Tuesday Ocado announced its first quarterly trading update since the creation of its joint venture with Marks & Spencer, and was keen to show the impact from the Andover CFC fire on its UK retail operations was minimal.

The 50:50 jv between Ocado and M&S posted retail revenue growth of 11.4% in the 13 weeks to 1 September - well within its guidance of 10% to 15% growth for the rest of the year, despite the fire in February severely limiting output.


Average orders per week were up 12.1% despite the continued capacity constraints, though average basket size fell 0.8% year on year back to £105.42, reflecting higher purchase frequency.

Although there was little in the release to surprise the market, Bernstein praised its continued outperformance. “It is worth reminding ourselves: UK grocery is growing at 0.5%, the discounters at 7.5% and Ocado is outgrowing all of them at 11.4% despite the impact of a fire.”

A more cautious Jefferies noted its UK retail sales were increasingly “inconsequential” for the group, with its 50% stake in the jv accounting for only 10% of the group’s equity worth. The broker argued: “[Ocado’s US partner] Kroger’s upcoming capital markets day and Walmart’s aggressive pricing on its delivery pass should prove more relevant. Not necessarily in a good way.”

Ocado shares were unmoved at 1,350.5p on Tuesday but are up 45.1% year on year.

The rest of the UK grocery market has also recovered somewhat in recent weeks, as UK economic data, grocery market sales figures and the perceived lessening likelihood of a no-deal Brexit have supported share prices in the sector.

Sainsbury’s, now the fastest growing big four grocer according to the latest Kantar grocery market share figures, has rebounded 15.5% over the past 30 days back to 217.6p, while Morrisons is up 10.2% to 200.5p over the same period after posting better than expected sales figures. Tesco is up 6.8% to 234.7p and even M&S is up 8.4% despite its recent ejection from the FTSE 100.