Ocado sales recover as price cuts attract shoppers: boost for M&S as collaboration bears fruit

Ocado customers are buying more goods again after a series of price cuts won back middle class shoppers.

The online supermarket said sales of £569.6 million in the three months to August 27 were 7.2 per cent higher than 12 months earlier.

Crucially for the company – and its Ocado retail partner Marks & Spencer – shoppers bought more items in August than in the same month last year.

This was the first increase in volumes since the peak of the Covid-19 pandemic, when lockdown restrictions led to a boom in online grocery deliveries.

Ocado Retail boss Hannah Gibson praised the company’s “great momentum” and added: “We started the last quarter positively.”

On the right track: Ocado said sales of £569.6m in the three months to August 27 were 7.2% higher than 12 months earlier

Ocado shares rose 1.6 per cent, taking its annual gain to 30 per cent, while M&S rose 2.7 per cent.

Its shares have risen more than 80 percent this year, securing it a place in the FTSE 100 index after a four-year absence.

Signs of recovery in the Ocado retail business will be a welcome relief for bosses there and at M&S.

At Marks’ annual general meeting in July, chairman Archie Norman said he was “not happy” with the performance of the joint venture, which sells M&S food through the Ocado website.

Tim Steiner, co-founder and chief executive of the Ocado Group, which includes both the technology business and the retail joint venture with M&S, also admitted that the results of the merger had been “disappointing” and that the deal was “not “was disappointing” where we wanted it to be.

Russ Mold, investment director at AJ Bell, said yesterday’s numbers suggested things were “looking up”.

Ocado said it received an average of 381,000 orders per week in the third quarter – up 1.9 per cent on the previous year – and customer numbers rose 1.5 per cent to 961,000.

The average value of shopping baskets rose by 4.2 per cent, or £4.87, to £120.72, but the number of items fell again from 45 to 44.

Delivery of the goods: Things are looking up for Tim Steiner from Ocado (left) and Archie Norman from M&S (right).

“The average basket size is still shrinking, which means it’s not a full house for Ocado in terms of progress,” Mr Mold said.

Ocado said it expects its retail business to return to the black in the second half of the year after posting a loss of £2.5 million in the first half.

Gibson said high household bills are still a problem for the grocer’s affluent customer base.

In early September, Ocado announced its third round of price cuts since June, making more than 630 price cuts.

Gibson said: “Value is incredibly important to customers right now.”

“The cost of living is a very real thing for many customers. “It’s not a past tense.”

Despite recent price cuts, prices for all products rose by an average of 8.4 per cent in the third quarter, although Ocado said this was “significantly” below the general level of food inflation in the UK.

Sophie Lund-Yates, analyst at Hargreaves Lansdown, said: “All attention now turns to the final quarter as festive trading picks up again and this should provide a clear sign of consumer confidence among Ocado customers and settle the debate. “ about how resilient Ocado’s offering really is – with volumes being the focus.”