Ocado Retail, the online grocery joint venture between Ocado Group PLC (LSE:OCDO) and Marks and Spencer Group PLC (LSE:MKS), revealed sales fell by 3.9% in the fourth quarter, held back by a shortage of lorry drivers and warehouse staff.
However, underlying demand is strong, the company said, as it predicted its "best-ever" Christmas ahead.
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Full-year performance is expected to be in line with guidance, although strong demand will be offset by labour pressures and capacity constraints, the company said in its trading statement for the 13-week period to 28 November 2021.
It said vacancies are now returning to more normal levels and forecast mid-teens percentage growth in sales for 2022, at the top of the historic pre-COVID range of 10%-15%.
It noted that the results for 2022 will be impacted by investments of £50mln to support growth.
Retail revenue declined to £547.8mln in the fourth quarter from £570.1mln in the same period last year, but surged by 31.6% against the fourth quarter of pre-pandemic 2019.
Order growth was impacted by consumers returning to offices and physical stores after the easing of COVID-19 restrictions and by reduced capacity at the Erith warehouse following a fire.
Average weekly orders grew by 8.5% from last year to 375,000 and by 14% versus 2019, boosted by a 22% surge in active customers to 832,000.
The value of the average basket in the fourth quarter fell by 12% from last year to £118, although it was 13% higher than two years ago.
Marks & Spencer products accounted for nearly 30% of the average basket, demonstrating the continued popularity of these products, Ocado said.
The company said it has introduced measures to mitigate against the increase in costs driven by rising energy prices and shortages of dry ice.
Following the success of its same-day grocery delivery service Zoom in West London, the company plans to open four more Zoom sites next in 2022.
Ocado Retail’s chief executive Melanie Smith said: “The investments we have made over the past year mean we have significant capacity for growth in 2022 and we will continue to invest in facilities, systems and people in the year ahead to deliver on our long-term growth potential.
“We are working hard to manage current industry challenges, and Ocado Retail has great momentum as we get ready for another record Christmas and further strong progress next year."
Ocado shares rose 9% to 1,730.5p, having tumbled over 40% since hitting all-time highs late in 2020, while MKS was down 1% to 231.2p, after recently hitting two-and-a-half year highs above 240p.