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* Q2 retail revenue growth accelerates from Q1
* Says took a few weeks to adapt to crisis
* Suspends guidance for full year 2020
* Shares up 3.2%
(Adds detail, CFO comment, updates shares)
By James Davey
LONDON, May 6 (Reuters) - British online supermarket Ocado
has seen retail revenue soar 40.4% year-on-year in its
second quarter to date as it ramped up capacity to meet
unprecedented demand during the country's coronavirus lockdown.
Growth accelerated from 10.3% in its first quarter to March
1, sending its shares up 3.2% at 0935 GMT, extending gains for
2020 to 35%.
Britain has been on lockdown since March 23, but Prime
Minister Boris Johnson has said the country is past the peak of
the pandemic and is expected to set out a plan on Sunday on how
it might gradually ease restrictions.
In March, Ocado was forced to stop registrations from new
customers and impose a queuing system online after it saw a
several hundred percentage increase in web traffic.
"It took us a few weeks to adapt to a completely new
situation, and I know we didn’t serve our customers as well as
we’d liked (to)," finance chief Duncan Tatton-Brown told
reporters.
Pre-crisis, about 7% of UK grocery sales were delivered to
homes - about one in every 15 households. Industry leader Tesco
had a 35% share of the online grocery market, while
Ocado had about 14%.
All of Britain's big four grocers - Tesco, Sainsbury's
, Asda and Morrisons - have been ramping
up their online capacity to meet some of the extra demand. But
even if delivery capacity doubled, some 85% of the market would
still need to be served by stores.
"There is too much demand in the UK for online (grocery) for
the UK operations to serve that," said Tatton-Brown.
"So as an industry we can’t meet the demand, and Ocado is
one of the players in the industry and therefore shares that
disappointment."
Ocado's capacity had increased to enable the delivery of
over 40% more groceries in the UK than before COVID-19 hit, with
its mature warehouses running at their peak and at their best
ever efficiencies.
The number of items per customer basket appeared to have
passed its peak, but remained high, Ocado said. The share of
fresh and chilled products in the mix, relative to ambient store
cupboard items, was also returning to normal, it added.
LONG-TERM SHIFT
Ocado expects the long-term shift towards online grocery to
accelerate post the crisis.
But it highlighted uncertainties about its length, customer
reaction immediately afterwards and its long-term impact on
customers' disposable incomes.
It said it had suspended its guidance for retail revenue for
full year 2020 until it could accurately forecast likely
outcomes. The group has cash of 1.2 billion pounds on its
balance sheet.
Ocado Retail is a joint venture between Ocado Group and
Marks & Spencer. Ocado's supply deal with Waitrose will
finish at the end of August, when it will be replaced with M&S.
Ocado has a stock market capitalisation of 12.2 billion
pounds ($15.2 billion), which is more than the combined market
capitalisations of Sainsbury's, Britain's No. 2 supermarket
group by sales, and No. 4 Morrisons.
The share price has mostly been driven by its
state-of-the-art robotic technology which has enabled it to win
partnership deals with supermarket groups around the world,
including Kroger in the United States, Casino
in France and Aeon in Japan.
Ocado's update was published ahead of its annual
shareholders' meeting, where the firm could face an investor
revolt over executive pay. Co-founder and CEO Tim Steiner was
paid 58.7 million pounds in 2019.
The company says its rewards are justified because it
created 7.5 billion of value for shareholders in the five years
to 2019.
($1 = 0.8040 pounds)
(Reporting by James Davey; Editing by Paul Sandle and Jan
Harvey)
