Ocado Retail – Consumers Show Resilience

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  • Q3 revenue up 7.2% to £569.6m as prices rise 8.4%
  • Volumes returned to positive territory in final month of the quarter
  • Average orders per week and active customers grow 1.9% and 1.5%
  • No change to full year guidance, including mid-single-digit revenue growth

The Consumer Confidence Of Ocado Customers

A tentative return to volume growth suggests consumers are showing resilience. Ocado Group PLC (LON:OCDO) isn’t the cheapest offering around, despite big investments in dropping prices. This shows the power of getting the proposition right, which has included ironing out concerns about the placement and promotion of M&S products. This higher end of the market is more insulated from economic trouble, but it certainly isn’t immune.

The fact that price increases of around 8% are so far below the rate of grocery inflation, and the difficult volume trends of late, shows that Ocado customers are only willing to stomach a certain degree of price increases. Starting near the top of the price spectrum leaves far less room for manoeuvre.

Both average orders per week and active customer numbers have only ticked up under 2% each. That’s not too bad considering there were big acquisition efforts this time last year, but it’s a trend that will need to be watched from here to make sure this isn’t a protracted bout of sluggishness.

All attention now turns to the final quarter, where festive trading starts to ramp up and this should give a clear indication into the consumer confidence of Ocado customers, and settle the debate about how resilient Ocado’s offering really is – with volumes taking centre stage.

Article by Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown