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Ocado Retail's revenue growth accelerates on lockdown demand

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James Davey
·2-min read
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By James Davey

LONDON (Reuters) - British online supermarket Ocado Retail said revenue growth accelerated to 39.7% in its first quarter on strong grocery delivery demand due to pandemic lockdowns, though it cautioned the rate of growth would moderate in coming quarters.

The joint venture between Ocado Group and Marks & Spencer, said revenue rose to 599 million pounds ($838 million) from 429 million in the same period a year earlier. Revenue growth in the previous quarter was 34.9%. [L8N2IQ1UY]

Online's share of the UK grocery market has more than doubled over the year of the pandemic, reaching 17% in February, according to market researcher Nielsen.

Ocado CEO Tim Steiner said on Thursday the increase represented an acceleration of a long established trend.

“Channel shift is not a new phenomenon, it is not something caused by COVID which will go away when COVID is over, quite the contrary,” he told reporters.

The first quarter is, however, the last one before comparative numbers become considerably harder as the pandemic started boosting sales significantly from March 2020.

Ocado still expects revenue growth in the second quarter.

Shares in the group were down 3% at 1017 GMT, valuing it at 15 billion pounds.

While the stock is up 37% year-on-year, it has fallen 24% over the last month.

Analysts attribute the correction to a wider sell-off in the technology sector, a lack of news regarding additional tech partnership deals and the increase in capital expenditure Ocado announced in its annual results last month.

Steiner said Ocado was talking to lots of retailers about potential tech partnerships, though progress was being hindered by the impact of the pandemic on travel.

Ocado aims to ramp up capacity over the course of 2021. Last month it opened one mini robotic warehouse, or Customer Fulfilment Centre (CFC), in Bristol, western England, and plans to open two standard-sized CFCs this year.

A minimum of 12 new micro sites are being sought, primarily in London, to support the rollout of its Ocado Zoom fast delivery service.

"We are highly confident that as we add capacity, we will quickly utilise it. We are currently registering more customers every week than we can serve," said Steiner.

($1 = 0.7148 pounds)

(Reporting by James Davey; editing by Costas Pitas, Jason Neely and Kim Coghill)