Ocado – Merry Christmas And A Bumpy New Year

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Ocado Retail – the joint venture with Marks and Spencer Group Plc (LON:MKS) – has said 2021 is expected to be in line with guidance, as strong demand is offset by labour shortages and capacity constraints.

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Q3 2021 hedge fund letters, conferences and more

Shopping habits are returning to pre-covid levels. Retail revenue in the fourth quarter of £547.8m was up 31.6% on 2019, but down 3.9% on last year. That reflects an 8.5% increase in average orders per week to 375,100, but a 12% fall in the average basket size, as people spent less time at home. Trends in the fourth quarter have been positive, and the group’s predicting its best ever Christmas.

New capacity came online at Andover and Purfleet in the period, and Erith performed in-line with expectations. New customer fulfilment centres are expected to open at Bicester and Luton in the next two years. About £50m will be spent across new capacity and increased marketing next year.

The shares were up 4.2% following the announcement.

A Merry Christmas For Ocado Retail

Sophie Lund-Yates, equity analyst at Hargreaves Lansdown:

“Ocado Retail is predicting a merry Christmas, underpinned by strong demand, but the new year poses some more challenging questions. Labour shortages, cost inflation, another round of ramped up capital spending, and fierce competition all spring to mind.

Unfortunately, margins are due to come under fire, which is a real disappointment. Spending to boost capacity and technological capabilities does make sense, but without a guarantee on how severe labour and supply chain shortages are going to be on the top line, this comes at a touchy time. It’s also uncertain just how our shopping habits will evolve.

Ocado Group PLC (LON:OCDO)’s more premium image will be holding it in good stead as people try to make this Christmas extra special after last year’s dampened celebrations. But a spectacular Christmas does not a full year make, so the pressure’s on.”

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