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Ocado and M&S joint venture's sales slow in fourth quarter

Melanie Smith, chief executive of Ocado Retail, said “good progress” has been made getting ready for the September 2020 switchover to sell the M&S food range online for the first time

Ocado Group PLC -

Ocado Group PLC (LON:OCDO) and Marks & Spencer Group PLC (LON:MKS) have seen growth slow slightly at their online grocery joint venture in recent weeks.

Ocado Retail, of which M&S has owned a 50% share since August, made revenue of £429.1mln in the 13 weeks to 1 December, up 10.8% on the same period a year ago.

Average orders rose 10.4% to 350,000 per week and the average order amount stayed at £104.90, while the massive robot-operated depot at Erith in South London generated 70,000 orders per week as it continued to ramp up.

READ: Ocado sees strong start to joint venture with M&S

That compared to revenue growth of 11.4% in the period to 1 September when average orders per week rose 12.1% but Ocado said this slowing was "in line with our guidance".

Melanie Smith, chief executive of Ocado Retail, said “good progress” has been made getting ready for the switchover in September 2020, when M&S food range will be available online for the first time, after Ocado’s relationship with Waitrose terminates.

After a review of M&S products in comparison to those currently offered by Waitrose supposedly found that it would result in cheaper or equally priced substitutes for the 4,000 Waitrose products out of the current total range of over 55,000 plus the "many more" M&S lines that would be added.

“We are also planning fresh capacity, to offer customers more availability, and have new customer fulfilment facilities in Bristol and Purfleet, and a rebuilt state of the art facility at Andover, on the way. As a team, we could not be more excited," Smith added.

In afternoon trading, Ocado shares were 0.6% higher to 1,204.50p, while M&S shares added 1% at 209.30p.

In a note, Ian Forrest, Investment Research Analyst at The Share Centre said the statement showed "good current trading but more importantly for both Ocado and M&S investors they show the venture is well prepared for the switchover next year, a very important moment for M&S in particular as it will be the first time its food range will be available online."

"For Ocado the retail side is also significant but it is now more focused on growing its Solutions business which provides major retailers around the world with the technology to provide online deliveries. The recent successful £600m bond sale and agreement with Japan’s retail group Aeon underline the growth on that side of the business,” he added.

 -- Adds share prices; analyst comment --

Quick facts: Ocado Group PLC

Price: 1334.5 GBX

AIM:OCDO
Market: AIM
Market Cap: £9.48 billion
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