28 March 2023
If you are covering Ocado Retail’s latest results, please find below a comment from Chris Beckett, head of equity research at Quilter Cheviot:
“Ocado Retail delivered slightly weaker than expected sales in Q1 as renewed customer growth was offset by customers buying fewer items. In fact, average order value was flat and given how high food inflation has been, it is surprising to see it struggle to boost revenue in a time of elevated prices.
“Management believe sales growth should improve as we go through the year. It is hoping that as inflation is expected to fall sharply, consumer confidence will return as cost of living struggles potentially fade and should therefore see improved sales. It will also have easier comparatives following a weak end of 2022 and beginning of this year.
“Ultimately, the joint venture with M&S is only about 10% of the overall group’s valuation. What is seen as more important is the success of the international technology business. Indeed, you just have to look at the partnership with Kroger in the USA and the fact it is pausing new Customer Fulfilment Centres while they refine the operating model. This is far more important to the long term valuation of Ocado and the present valuation of the group is discounting little immediate success.”
