Yahoo Finance Ocado's M&S partnership pays off as sales rocket 35%
Ocado (OCDO.L) saw retail revenue rocket by 35% in the fourth quarter of 2020 as its partnership with Marks & Spencer (MKS.L) proved popular with customers.
The company said in a trading statement its revenues had come in at £579.6m ($771.4m) in the 13 weeks to the end of November, up by 35% on the same period a year earlier.
Average orders per week stood at 360,000, a 3% increase year-on-year.
The company’s warehouse Erith CFC was processing over 130,000 orders per week by the end of the period.
The online supermarket said the growth reflected “strong demand for online grocery and the continuation of a smoothed trading week compared to the peaks and troughs that reflected normal shopping habits pre-COVID.”
Further lockdowns and increased social distancing restrictions across the UK during the month of November also contributed to a continued strong trading performance as consumers turned to online shopping.
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Ocado began supplying M&S products on its website in the first week of August, as part of a new deal replacing its former partnership with Waitrose. Deliveries began in early September.
The online grocer said “customers continue to embrace the full M&S range with the biggest selling lines coming from everyday essentials in the M&S fresh categories.”
The company said it now expects full year profits to be over £70m.
Ocado is planning to open three new warehouses in 2021 which will give the company 40% more capacity, according to Melanie Smith, Ocado Retail's CEO.
Tim Steiner, chairman of Ocado Retail, said: “We enter the holiday period with confidence and look ahead to better times for all in 2021.”
Sophie Lund-Yates, equity analyst at Hargreaves Lansdown said: “Ocado Retail is in the enviable position of being able to say lockdowns help sales. As new restrictions came into force in early November, people once again logged-in en masse for their grocery shopping, to avoid having to visit a physical shop. Shopping habits are a little less heady than the first lockdown, with the average spend normalising, but it’s hard to argue with a 35% rise in overall retail revenue.
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“This isn’t just good news for revenues, but profits too. A higher volume of sales rattling through warehouses boosts margins, which is why the group has been able to upgrade cash profit guidance once again. Customers are shopping more frequently throughout the week, as COVID-19 disrupts yet another pattern of everyday life. Where there used to be peaks and troughs, the trading week has been smoothed out.
“This will be good news for M&S too, who before this joint venture, didn’t really have an online business to speak of. This has been quite the debut, and acts as a very useful revenue stream in what has been an incredibly challenging year for the clothing and home business. M&S products are particularly coveted this time of year, so the timing of the latest lockdown combined with festive-treat shopping, has ultimately been a recipe for success.”
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