17 January 2023
If you are covering the latest trading statement from Ocado Retail, please find below a comment from Chris Beckett, head of equity research at Quilter Cheviot:
“Ocado Retail, the joint venture between Ocado and M&S, delivered a poor fourth quarter trading statement today, highlighting that the bumper Christmas sales have not been enjoyed across all retailers. Consumer trends are still normalising following the pandemic, so numbers will be volatile in the short-term, but it is at least encouraging to see the business growing customer numbers and revenue.
“The joint venture saw revenue increase 0.3%, and customer numbers jump 13%, though this was almost completely offset by a reduction in customer order frequency (-2%) and basket size (-8%). The business is currently running at about 2/3 of capacity, so it will be looking for ways to boost this as online ordering returns to growth following a post Covid normalisation.
“Ocado is not immune from the cost-of-living squeeze either, with management expecting basket size pressures to continue in the first half of the year but things start to moderate in the latter half. As a result, profits will have pressure placed on them in 2023.
“The joint venture represents about 10% of Ocado’s valuation but does impact sentiment in which is a very volatile stock. Following a strong start to the year, today's sell off is understandable, but we would see the parent company's results on 28 February as much more important.”
