Although the magnitude of Ocado Retail's revenue upgrade wasn’t large, the key point is the "exceptionally strong" growth for the past quarter, analysts said, showing the sort of growth that 50% owner and technology provider Ocado Group PLC (LSE:OCDO) can deliver for its third-party clients in other countries.
The bullish third-quarter update showed signs that "the business is executing well", with double-digit growth in sales volume important for both profit margins and for "broader sentiment", said Barclays analyst Sarah Roberts.
Ocado Retail, the joint venture between Ocado Group PLC (LSE:OCDO) and Marks and Spencer Group PLC (LSE:MKS), reported revenue growth for the 13 weeks to 1 September of 15.5% to £658 million, which was 7% better than the consensus City forecast.
Volumes grew 15.4%, average orders grew 14.7%, while average basket values and selling prices were broadly flat, versus UK grocery inflation of around 2%.
As a result, Ocado Retail now expects full-year revenue growth of "low double-digit %" up from the prior "mid-high single digit", whereas the average City forecast was for around 10%.
"Overall, this is a very positive release from Ocado Retail and a sign that the business is executing well," the Barclays analyst said, with the double-digit volume "a positive sign that the Retail business can accelerate growth after cycling through tough pandemic/cost of living comps for Ocado's International partners using Ocado's CFC solution".
But she added that for Ocado Group, "we continue to think the Tech Solutions business is the single biggest driver of Ocado's equity story".
Peel Hunt analyst James Lockyer was of a similar view.
"The most important takeaway is to remind investors (and its B2B clients) that the Ocado Solutions tech proposition can deliver these types of results," he said, with Ocado achieving seven consecutive months as the UK’s fastest-growing grocer.
Ocado shares jumped almost 9% in early trading to a six-week high over 400p, before easing off over the day to 363p, a gain of 3.8%.
Shares in M&S, despite its 50% ownership, were little moved, up 0.5% at 369.3%.