Ocado sales bounce back as price cuts lure shoppers: Boost for M&S as tie-up delivers

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

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

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

This was the first rise in volumes since the depths of the Covid-19 pandemic when lockdown restrictions led to a boom in online food deliveries.

In a further boost, Ocado Retail boss Hannah Gibson hailed the firm’s ‘great momentum’, adding: ‘We have started the final quarter positively.’

On a roll: Ocado said sales over the three months to August 27 were 7.2% higher than 12 months earlier at £569.6m

Ocado shares rose 1.6 per cent – taking its gains for the year to 30 per cent – while M&S gained 2.7 per cent. 

Its stock has risen more 80 per cent this year, earning it a place back in the FTSE 100 index after a four-year absence.

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

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

Tim Steiner, co-founder and chief executive of the Ocado group, which includes its technology business as well as the retail joint venture with M&S, also admitted the results of the tie-up have been ‘disappointing’ and that the business was ‘not where we wanted it to be’.

Russ Mould, investment director at AJ Bell, said yesterday’s figures suggest ‘things are looking up’.

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

The average value of shoppers’ baskets rose by 4.2 per cent or £4.87 to £120.72 but the number of items dropped once again from 45 to 44.

Delivering the goods: Things are looking up for Ocado’s Tim Steiner (left) and Archie Norman of M&S (right) 

‘The average basket size is still shrinking, which means it is not a full house for Ocado in terms of progress,’ said Mould.

Ocado said it expects the retail business to be back in the black in the second half of the year following a £2.5million loss in the first. 

Gibson said high household bills were still a concern for the grocer’s well-heeled customer base.

At the start of September, Ocado announced its third round of price cuts since June and has made more than 630 reductions.

Gibson said: ‘Value matters incredibly to customers at the moment. 

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

Despite the recent reductions, prices increased by 8.4 per cent on average across its products in the third quarter, although Ocado said this was ‘considerably’ below wider levels of grocery inflation in the UK. 

Sophie Lund-Yates, an analyst at Hargreaves Lansdown, said: ‘All attention now turns to the final quarter, where festive trading starts to ramp up, and this should give a clear indication into the consumer confidence of Ocado customers, and settle the debate about how resilient Ocado’s offering really is – with volumes taking centre stage.’