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Pin to quick picksMarks & Spencer Share News (MKS)

Share Price Information for Marks & Spencer (MKS)

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Share Price: 258.30
Bid: 258.30
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Change: 3.70 (1.45%)
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Open: 254.60
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UPDATE 3-Ocado's sales growth held back by capacity constraints

Thu, 10th Dec 2020 08:05

* Sales growth at retail JV with M&S moderates to 35% in Q4

* Ocado raises FY earnings forecast to "over 70 mln stg"

* New capacity coming in 2021

* Shares down 5%, paring 2020 gains to 72%
(Adds detail, CFO comment, shares)

By James Davey

LONDON, Dec 10 (Reuters) - British online supermarket Ocado
Group raised its annual earnings forecast for the
second time in two months, though sales growth at its retail
joint venture with Marks & Spencer has slowed due to
capacity constraints.

The group has seen sales soar this year as the COVID-19
pandemic has generated huge demand for grocery home delivery.

Revenue at its M&S joint venture rose 34.9% to 579.6 million
pounds ($772 million) in its fourth quarter to Nov. 29 - a
slowdown from third quarter growth of 52%.

"The slower rate of growth compared to Q3 reflects the
seasonality of the period," Ocado Retail finance chief Niall
McBride told reporters on Thursday.

"The bottom line, however, is that we've continued to
operate at capacity over the quarter."

Shares in Ocado were down 5% at 1005 GMT, paring 2020 gains,
which have been mainly driven by the technology side of the
group, to 72%.

Ocado forecast earnings before interest, tax, depreciation
and amortisation (EBITDA) of "over 70 million pounds" ($93
million) for 2019-20 versus a previous forecast of "over 60
million pounds". EBITDA in 2018-19 was 43.3 million
pounds.

Average orders per week rose 3% to 360,000 in the fourth
quarter, and average order size was 133 pounds.

In September, the Ocado Retail venture switched from using
Waitrose to M&S products.

Ocado said sales and earnings growth in 2020-21 would depend
on the extent to which it returns to a "normalised" trading week
and when planned additional capacity goes live.

It plans to open three new warehouses in 2021, which will
ultimately provide 40% more capacity.

Ocado's capital-intensive and centralised fulfilment model
has restricted its ability to quickly increase its capacity
during the pandemic.

In contrast, Britain's big four grocers - market leader
Tesco, Sainsbury's, Asda and Morrisons
- were quickly able to adapt their predominantly
store-pick models to boost capacity, enabling them to deliver
faster growth and win share of the online market.

Online grocery shopping has doubled its share of the UK
market to nearly 14% since the start of the pandemic and Ocado
reckons it could reach 30% over the next few years.

($1 = 0.7497 pounds)
(Reporting by James Davey, Editing by Paul Sandle and Mark
Potter)

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