Ocado warns of falling sales as buyers reduce cost of living crisis | ocado

0

Ocado warned that annual sales would fall because customers are trading value products and buying less overall amid a worsening cost of living crisis.

The online grocer, which is part-owned by Marks & Spencer, said sales were up 2.7% from a year ago in the 13 weeks to August 28, an improvement on the decline of the previous quarter.

However, in the face of soaring energy bills and rising food prices, shoppers are putting less in their basket and looking for cheaper products. The average basket value fell by 6% from £123 to £116.

“Despite positive customer growth, the accelerating decline in sales and shrinking baskets, particularly in recent weeks, means that we now expect a slight decline in sales in 2022 and near Ebitda. balance [earnings before interest, tax, depreciation and amortisation]“, said Ocado.

Shares fell 12% after Tuesday morning’s update, making Ocado the biggest loser on the FTSE 100.

In May, Ocado warned that its sales growth would be less than half the rate it had hoped as the cost-of-living crisis, coupled with a return to office and restaurant work, hit trade. The picture has since deteriorated further.

The company expanded its less expensive range of 750 own-brand products by 75 items. Its average selling price increased by 5% over one year, made up of a 7% inflationary increase in food prices offset by a 2% drop linked to customers’ choice of cheaper alternative products.

Ocado said rising costs, primarily energy and dry ice, will weigh on earnings in the fourth quarter. The cost of electricity is about three times what it was last year, and fuel costs for the year are expected to be about 15% higher. At similar levels of use, this adds costs of £20-25m. The price of dry ice has risen sharply, which would add another £15-20 million in annualized costs, although the company is exploring alternatives to dry ice.

Ocado has built new warehouses and the Bicester center is now open, one of four new centers since early 2021 that will see the company process 600,000 orders per week. It receives 374,000 orders per week. Ocado also provides the technology needed to build high-tech warehouses for overseas retailers.

Share.

Comments are closed.