TIDMOCDO
RNS Number : 9006M
Ocado Group PLC
17 January 2023
Ocado Retail FY22 Q4 Trading Statement
FY22 performance in line with guidance; record Christmas
providing strong
momentum as we enter the new year
Ocado Retail Ltd ("Ocado"), a joint venture between Ocado Group
plc ("Ocado Group") and Marks & Spencer Group plc ("M&S"),
today announces its trading statement for the 13 weeks to 27th
November 2022
Highlights
4Q 2022
-- Q4 Retail revenue of GBP549.4m, up 0.3% versus the same quarter last year, a result of:
-- Average orders per week (Ocado.com) of 382,000, up 1.9%
year-on-year and reflecting 940,000 active customers(1) at end Q4,
up 12.9% year-on- year, offset by reducing frequency in customer
shopping compared with the pandemic period and as customers respond
to the cost-of-living crisis
-- Average basket value (Ocado.com) of GBP117, down 1.3%
year-on-year as a 7.6% increase in the average selling price(2) per
basket item, the lowest price inflation of all major supermarkets,
was offset by a 8.3% fall in average items per basket (to 45 items)
versus the same quarter last year. Alongside these two major
factors, small moves in a combination of other items(3) resulted in
the overall decline in basket value
-- Moves in other line items of -0.3%, primarily driven by a
normalisation in vouchering spend (revenue is shown net of
vouchers) compared with the historic lows of the pandemic
period
FY 2022
-- Full-year revenue of GBP2.2bn was down 3.8% from the prior
year, up c. 40% from FY19. While average orders per week (+5.8%)
were up in the year, reflecting an increase in active customers,
and full-year average selling prices have increased by 4.4% (from
GBP2.44 to GBP2.55), an unwind of pandemic shopping behaviours,
accelerated by the onset of the current cost of living crisis,
resulted in lower basket volumes (-12.1%, 6 fewer items) and
declining shopping frequency, in turn driving an overall year-on
year decline in revenue
-- Current headwinds related to inflationary costs, capacity
investments to support future growth and higher marketing costs
continued to weigh on profitability; for the full year, we expect
close to break-even EBITDA, in line with guidance
Christmas Trading
-- We have started FY23 strongly with record Christmas sales, up
15% over the five days before Christmas, and orders up 13%,
including the highest level of orders ever recorded in a single day
(more than 72,000)
Key financials
13 weeks 13 weeks Growth 3-Year
Q4 2022 Q4 2021 v Q4 2021 CAGR
GBP549.
Retail revenue (4) 4m GBP547.8m +0.3% +9.6%
--------- ---------- ----------- -------
Average orders per
week (5) 3 82,000 3 75,000 +1.9% +5.1%
--------- ---------- ----------- -------
Hannah Gibson, Ocado Retail's Chief Executive Officer, said:
"This year we delivered our biggest ever Christmas for our
customers at Ocado. A huge thank you to all my colleagues for
making this possible. We now have close to 1m active customers, our
largest ever customer base and we see huge potential to convert
those who have now trialled online shopping elsewhere to become
Ocado customers.
The year ahead will set us up to deliver strong sales and profit
growth over the mid-term. In 2023 we will continue to strengthen
and improve our leading customer proposition, including investing
in value to help customers manage cost of living pressures, while
keeping tight control of our costs. We will also be doing much more
to unlock the potential of our partners, combining the benefits of
Ocado's technology with the magic of M&S products.
While the current market environment is challenging for
everyone, I am very excited in the future for Ocado Retail.
Building on 20 years of amazing service and innovation, we are
confident of continuing to raise the bar in online grocery and
working with our partners to deliver the very best experience for
our growing customer base."
Strong growth in customer numbers
As reported by Nielsen, Ocado Retail continues to grow its share
of online grocery, increasing to 12.3% by the end of the quarter,
up from 11.7% in the prior year, as it attracts increasing numbers
of customers who tried online grocery for the first time during
COVID and who are now looking for the best customer experience
online. As consumers continue to seek value online, the channel's
share of the market appears to be stabilising around 11% - versus
around 6% pre-COVID - and is expected to grow next year, according
to IGD.
Ocado's active customer base was up 12.9% year on year, to
940,000 at the year-end, evidencing strong customer demand for the
service and value offered by Ocado.
Total customer numbers have been stable during the quarter, but
reflect an improving profile.
The active customer base includes both mature customers and
those just starting out (within the first five shops) on their
Ocado journey. Our mature customer base continued to grow in the
quarter. By contrast, the absolute number of newer customers within
the active base has reduced, as we have refocused our marketing
strategy from driving acquisition volume to prioritising the
acquisition of customers more likely to convert into the mature
base.
Customers acquired in the second half of the fourth quarter are
already evidencing stronger conversion to maturity, underpinning
our expectations for continued customer growth going forward.
Delivering value for customers
We have beaten the market on inflation. Grocery price inflation
across the 8 major UK supermarkets was 13.9% during the quarter to
end November 2022 (source: Which? report of 7 December 2022), and
the highest recorded rate for 30 years.
Ocado Retail has continue d to work closely with its suppliers
to deliver cost savings. These have been reinvested in price to
support our customers as they manage rising living costs. The same
Which? study shows that prices at Ocado Retail increased 9.4%, over
four percentage points lower than the overall market and the lowest
of all the major supermarkets.
As mentioned above, our own data shows average selling prices
have increased by 7.6%, after a 1.8% impact from customers trading
down within the basket. The pricing of our core range of Everyday
Saver lines has remained consistent with, or below, Ocado's larger
UK competitors.
Notwithstanding these actions taken to support our customers,
the challenging consumer environment has driven a faster
normalisation from the high volume customer baskets experienced
during the pandemic. The 7.6% increase in average selling price
recorded in the period was more than offset by a reduction in the
average number of items in the basket of 8.3% year on year, from 49
items to 45 items, in line with pre-pandemic levels. This saw the
average value of a basket declining overall by 1.3% to GBP117.
The new generation of CFCs are improving operating costs and
customer experience
Ocado's Customer Fulfilment Centres ("CFCs") orders continue to
grow while achieving progressively higher rates of productivity.
Average orders per week for Ocado.com during the quarter were 382k
(versus an installed capacity potential of around 600k), equivalent
to around two-thirds of installed capacity potential.
The level of capacity utilisation is expected to improve
significantly during 2023 as customers and orders continue to
grow.
Today, the latest generation of robotic CFCs are operating at
increasingly higher levels of productivity, with Andover and
Purfleet consistently achieving over 200 units picked per labour
hour within the facility ('UPH'), and Andover achieving a peak of
220 UPH, compared to UPH of around 150 for our first generation CFC
in Hatfield. The newest sites also have much lower energy
costs.
Going forward, with the rollout of Ocado Re:Imagined
innovations, we expect Ocado Smart Platform ('OSP') operated sites
to see further UPH improvements to over 300. At the same time,
these innovations will enable further improvements in customer
experience, notably with increased capacity for same day
deliveries.
Update on Zoom
In 2022, Ocado Retail expanded the reach of Zoom, its leading
immediacy offering. We have now opened 4 sites, including the
opening of Leeds at the end of November. Together, we expect these
sites to represent around GBP80m of annual sales at maturity.
Zoom is successfully reaching new customers for Ocado Retail
with more than half of Zoom customers acquired in FY22 having never
shopped on Ocado.com. Of Zoom customers who are active Ocado
customers, a high proportion of their spend on Zoom is
incremental.
2023 guidance and outlook
We entered the New Year with strong momentum following a record
Christmas.
In 2023 we will focus on our Perfect Execution programme:
focusing on unbeatable choice and reassuringly good value, and with
leading service, against the background of the cost of living
crisis in the UK.
Key initiatives that we are driving include:
-- Investing in great value for our customers including better prices and promotions
-- Unbeatable choice and service to provide all the products
that customers love, improved availability and deliveries back to
the kitchen table
-- Capitalising on the opportunity to leverage the M&S
relationship with regards to customer growth and our customer
proposition, and
-- Driving efficiencies across our operating model, returning
cost ratios as a percentage of revenue towards pre-pandemic levels
across the business, including operations, marketing and central
costs
We enter the year comparing against the larger volume basket
shopping behaviours that remained in place last year (following the
pandemic) and, as such, expect that the first half of 2023 will
therefore see lower basket sizes than those of the first half of
2022.
In the second half of 2023 we will no longer be comparing
against these larger basket sizes. This will support a return to
volume growth, improved capacity utilisation and reduced costs
relative to sales. Revenue growth will also reflect the impact of
price inflation.
The shape of the year will reflect the factors described above.
Though we expect positive and improving revenue growth as we
progress through the year, it is likely that EBITDA will be
negative in the first half and positive in the second half,
reflecting trends in volume growth.
Putting this together, we expect full year revenue growth in
2023 to be in the mid-single digits. While there remain many
uncertainties, we expect ORL to deliver marginally positive EBITDA
in 2023.
The improving trajectory forecast for the second half is
expected to underpin a strong recovery in 2024.
In the medium term, Ocado remains confident, in the light of
strong customer acquisition and continued improvements to
underlying productivity, that sales and EBITDA margin will recover
strongly. We will further build on Perfect Execution by making the
most of the product and customer opportunities with M&S, and
with the benefits of Re: Imagined still to come. Growing customer
numbers, orders and increased utilisation of available capacity
will, together, underpin a recovery to high-mid single digit EBITDA
margins.
Alongside this release, a short video is available on the Ocado
Group website here in which CEO, Hannah Gibson, discusses recent
performance, strategy, and the significant mid-term opportunities
ahead for Ocado Retail.
Ocado Group, on behalf of the joint-venture, will be hosting an
analyst conference call at 8.00am today. Please use participant
number: +44 (0) 330 551 0200 and confirmation code: 1220779. A
replay facility will be available through an on demand link for 90
days following the announcement.
Contacts
-- Stephen Daintith, Chief Financial Officer, Ocado Group plc,
on 01707 228 000
-- David Shriver, Chief Reputation Officer, Ocado Group plc, on
01707 228 000
-- Fraser Ramzan, Head of Investor Relations, Marks and Spencer
Group plc, on 020 3884 7080
-- Martin Robinson at Tulchan Communications on 020 7353
4200
About Ocado Retail
Online supermarket Ocado.com was established in 2000 and is one
of Britain's leading online retailers, now a 50:50 joint venture
between Ocado Group plc and Marks & Spencer Group plc. Covering
geographies comprising over 74% of UK households, every shopping
bag is carefully packed in one of seven distribution centres using
market leading software and technology. Shopping is then delivered
directly to customers using a network of regional spokes in
brightly-coloured vans. With award-winning mobile apps, Ocado
Retail delivers over 50,000 products, including big-name brands, a
range of quality M&S and Ocado own brand products and a
non-food selection. Thoughtful service features such as
colour-coded bags, digital receipts provided in date order,
reminder texts with your driver's name, along with convenient
hourly delivery slots complementing award-winning customer service
on email, phone and social media.
Notes
1. Active customers are classified as active if they have
shopped at Ocado.com within the previous 12 weeks
2. Average selling price refers to Ocado.com and is defined as
gross sales divided by total eaches
3. Other items includes delivery income and smart pass,
post-delivery adjustments and cancelled orders
4. Retail revenue comprises revenues from Ocado.com and Ocado
Zoom and excludes revenues from Fetch in current and prior
periods
5. Average orders per week refers to results of Ocado.com
6. Average basket size refers to results of Ocado.com
7. Growth percentage calculated on a rounded basis
8. The figures used in this announcement are unaudited
9. A copy of this trading update is available on
www.ocadogroup.com and www.corporate.marksandspencer.com
Cautionary statement
Certain statements made in this announcement are forward-looking
statements. Such statements are based on current expectations and
assumptions and are subject to a number of risks and uncertainties
that could cause actual events or results to differ materially from
any expected future events or results expressed or implied in these
forward-looking statements. Persons receiving this announcement
should not place undue reliance on forward-looking statements.
Unless otherwise required by applicable law, regulation or
accounting standard, Ocado does not undertake to update or revise
any forward-looking statements, whether as a result of new
information, future developments or otherwise.
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END
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