Ocado Group PLC (LON:OCDO) has hailed the launch of its first two robot-operated depts for overseas clients in recent weeks and the accelerated growth of its UK grocery delivery joint venture.
Revenue since the end of March is up 40% on last year for the Ocado Retail business, the 50-50 partnership with Marks and Spencer Group PLC (LON:MKS), compared to 10.3% growth in the first quarter and 19% suggested in industry data from Kantar last week.
The number of grocery items per customer order “appears to have passed its peak but remains high”, the FTSE 100 group said in a statement ahead of its annual shareholder meeting on Wednesday, with more normal shopping behaviour returning.
Capacity and efficiency of the UK ‘customer fulfilment centres’ (CFCs) have been lifted, with Dordon near Birmingham processing up to 200 units per hour in some weeks, compared to 185 before the crisis, Erith in South East London processing 110,000 standard-sized orders per week versus an equivalent number of 80,000 at the end of the first quarter.
Another UK partner, Wm Morrisons Supermarkets PLC (LON:MRW) has increased the use of the Ocado platform for in-store store-pick fulfilment for online deliveries since the virus hit the UK.
Ocado Solutions, the arm that builds and supplies the ongoing technology for overseas grocery companies, oversaw the full launch of a first CFC for France’s Groupe Casino in March, in Fleury-Merogis to the south of Paris, and a second was test-launched by Canada’s Sobeys on 27 April in Vaughan, Ontario.
“The fact that these facilities have been delivered on time in the middle of this global health crisis demonstrates the ability of the business to execute well even under the most challenging circumstances,” Ocado said, though it withdrew guidance for the full year.
The group, which said cash on the balance sheet stood at £1.2bn, has not experienced any material delays in the delivery of future CFCs for Ocado Solutions customers, it said, apart from current restrictions on social distancing.
Ocado shares were up 2.5% on Wednesday morning to 1,722p, taking gains since the start of the year above 36%.
Sophie Lund-Yates, an analyst at Hargreaves Lansdown, said: “Demand is outstripping supply for online groceries and as a digital only supermarket Ocado is in prime position to benefit...We expect a longer-term increase in online demand. Households that may have never considered buying their weekly shop on a website, will by now be accustomed to the service, and it’s a habit a lot of people will want to continue. Ocado is well placed to capture this shift, both as a retailer and as a provider of digital solutions for other supermarket groups.”
She added that there could be more Solutions deals could be on the cards in the near future, “but we also wonder if a severe economic downturn could see grocers hold off on multi-million pound digital expansion”.
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