Ocado retail revenue soars 40% in Covid-19 lockdown

(Sharecast News) - Online supermarket company Ocado reported a hefty 40.4% rise in second quarter retail revenue as Britons had food supplies delivered during the coronavirus lockdown, but pulled full year guidance due to an uncertain economic outlook.
The rise compared to a 10.3% rise in the first quarter. Britons cleared supermarket shelves in last March as coronavirus fears sparked a wave of panic buying. A lockdown imposed by the government also saw many afraid to leave home, and turning to online suppliers.

"The number of items per basket appears to have passed its peak but remains high, as more normal shopping behaviours have returned, and the share of fresh and chilled products in the mix, relative to ambient, is also returning to normal," the company said on Wednesday.

Ocado said although it saw a long-term the shift towards online grocery accelerating post-crisis, there remained "many uncertainties about the length of the crisis and its impact on customers' disposable incomes" an suspending retail revenue guidance for 2020 until it could accurately forecast likely outcomes.

The company, which had to stop taking new customers as consumers panicked, said demand at the start of the outbreak "increased significantly, almost overnight", resulting in restrictions on the numbers of items on sale.

Ocado said these limits have since been rolled back as shoppers regained their nerve and returned to pre-crisis habits.

Hargreaves Lansdown analyst Sophie Lund-Yates said Ocado was in a "prime position" to benefit from demand outstripping supply for online groceries.

"Shopping habits are starting to calm down, which echoes sentiments from other grocers and the peak of consumer anxiety seems to have passed, with more tinned goods being left on the shelf compared to the early days of the outbreak," she said.

"We expect a longer-term increase in online demand. Households that may have never considered buying their weekly shop on a website, will by now be accustomed to the service, and it's a habit a lot of people will want to continue. Ocado is well placed to capture this shift, both as a retailer and as a provider of digital solutions for other supermarket groups."

"With 50% of the retail business being sold to M&S, the focus should be on the solutions business, where grocers are charged for using Ocado's robotic systems. For now the indicators suggest more deals could be on the cards in the near future, but we also wonder if a severe economic downturn could see grocers hold off on multi-million pound digital expansion. Right now it's too soon to tell, but overall, Ocado is in a fairly good position."