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(Alliance News) - Ocado Group PLC on Thursday reported a challenging start to its new financial year with consumer behaviour reverting to pre-Covid trends and inflationary pressures persisting.
Shares in the online grocer were down 7.1% at 1,118.88 pence on Thursday, placing the stock at the bottom of the FTSE 100 index in morning trade.
Ocado Retail Ltd revenue in the 13 weeks to February 27 was GBP564.7 million, down 5.7% on the GBP599.1 million notched a year before.
This was despite average orders per week growing 12% to 367,500, as the average basket size dropped 15%. It reflected an easing of pandemic restrictions and a return to in-office working, Ocado said.
Ocado Retail is a joint venture between Ocado and Marks & Spencer Group PLC. Shares in M&S were down 2.8% at 162.25p early Thursday.
"The last quarter has been encouraging for Ocado Retail despite the clearly evident challenges the industry and consumers are facing...Of course, as we have seen since the end of Covid restrictions, the value of the average basket and shape of the week continue to normalise," said Ocado Retail Chief Executive Melanie Smith.
Further, Ocado reported inflationary pressures in the quarter. The grocer said significant increases in raw materials and product cost prices, as well as in the prices for energy, utilities and dry ice, added further cost headwinds for the grocery industry.
"Ocado Retail has been working closely with suppliers where appropriate to actively manage this level of inflation. The business has moved certain retail prices, where costs could not be mitigated, in line with the rest of the market and will continue to monitor the market to ensure alignment on prices and delivery of fair value to customers," said Ocado.
Looking ahead, Ocado said the scale of food price inflation, coupled with the overall level of market demand as the cost of living increases, is "difficult to predict".
"These uncertainties over inflation, which have increased significantly in recent weeks due to the war in Ukraine, the overall level of market demand, and the continued return to pre-Covid shopping patterns, mean that while easier comparatives, strong customer demand, and further growth in capacity, should see revenue growth end the year in the high-teens, the full-year growth rate may be closer to 10%," said Ocado.
Alongside its annual results last month, the firm said Ocado Retail revenue should return to "strong, mid-teens revenue growth" in 2022.
On margins, Ocado said it is carrying out a series of mitigating cost measures.
By Lucy Heming; lucyheming@alliancenews.com
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