Ocado sales jump over 40% but shopper habits returning to ‘normal’

Online supermarket Ocado has seen its revenue surge over 40 per cent this quarter, as locked-down Britons get their shopping delivered to their doors. 

The grocer said its decision to stop people ordering bottled mineral water helped it complete 6,000 extra orders a week. 

Across all its operations and partnerships, Ocado claimed it was enabling the delivery of ‘over 40% more groceries’ in the UK than before the pandemic. 

The group, which saw its share price rise over 3 per cent in early morning trading, is holding its annual general meeting today and is bracing itself for a possible shareholder revolt over ‘excessive’ pay and independence at the top.  

In a trading update, Ocado said ‘more normal shopping habits’ had returned in the last few weeks, with less people stocking up on long-life ‘ambient’ food.

While the number of items per basket appears to have passed its peak, it remained ‘high’, Ocado added. 

Ocado said it had ramped up its capacity ‘significantly’ during the pandemic in order to support the surge in demand, running its warehouses close to their peak capacity and highest efficiency. 

Its site in Erith, South East London, is currently processing 110,000 orders a week, compared to around 80,000 at the end of the first quarter. But, many customers using any of the country’s big grocers are still finding it difficult to get a timely delivery slot, even if they are in the ‘extremely vulnerable’ category.

The online grocer said it continued to price match individual products against key competitors like Tesco, but admitted it initially cut the number of products available on promotion ‘in order to discourage stockpiling in line with the industry.’

Last month, Ocado was accused of ‘profiteering’ from the coronavirus crisis by axing discounts and raising prices on thousands of goods.

The online supermarket reportedly removed 11,087 promotions and hiked the base price of 918 products between March 4 and April 8, according to industry data leaked to the Mail.

The move came as demand for its deliveries soared, with families avoiding going into shops amid fears over the spread of Covid-19. Ocado disputed the findings, insisting its prices had gone down on average over the period.

Tim Steiner, chief executive officer of Ocado, said: ‘We are facing quite a different challenge to many, as we scale up Ocado.com to play its part in feeding the nation, and as we help our clients launch and roll out their online businesses more rapidly against a backdrop of a likely long-term increase in demand for online.’

Ocado said it expected the long-term shift towards online grocery to accelerate post the COVID-19 crisis. 

But it highlighted uncertainties about the length of the crisis, customer reaction immediately afterwards and its long-term impact on customers’ disposable incomes. So it said it had suspended its guidance for retail revenue for full year 2020 until it could accurately forecast likely outcomes. 

From September, shoppers will be able to buy M&S food via Ocado, with the former paying Ocado £750million for a 50 per cent share of the new venture, which is starting when Ocado’s deal with Waitrose comes to an end.

This week, M&S extended the number of products available for delivery in 30 minutes via Deliveroo to 130 products across its ranges. 

While the likes of Ocado and M&S have had to ramp up their operations in response to the pandemic, many retailers have fallen by the wayside. Oasis and Warehouse have fallen into the hands of administrators, while John Lewis has warned that it might not reopen all its sites once lockdown restrictions are lifted.

But, not everything is a bed of roses for the likes of Ocado. Today, the grocer is holding its annual general meeting and is bracing itself for a possible investor rebellion. 

Ocado is facing a shareholder revolt today over ‘excessive’ pay as its chairman is questioned over his independence.

The online grocer awarded a £58million pay packet to chief executive Tim Steiner last year, and will give him a bonus of up to £100million over five years if its share price continues to rise.

Now three City advisory firms – Pirc, Glass Lewis and Institutional Shareholder Services – have urged the shareholders to vote against the pay policy at today’s AGM, calling the bonuses ‘excessive’ and saying that Steiner’s 12 per cent salary increase is ‘unacceptable’.

ISS has also said Stuart Rose, formerly the boss of Marks & Spencer, is not an independent chairman due to his large shareholding, and investors should therefore oppose his reappointment.

Royal London Asset Management, which holds a 0.3 per cent stake in Ocado worth around £34million, said it would vote against the bonus structure calling it ‘poorly designed’ and ‘excessive’. 

Ocado’s share price jumped sharply this morning and is currently up 3.22 per cent or 54p to 1,733p. A year ago, the share price stood at around the 1,368p mark.

John Moore, a senior investment manager at Brewin Dolphin, said: ‘Ocado has had a very different experience of Covid-19 to most businesses. 

‘While the wider market has dropped, its shares have surged more than 50 per cent in the year to date in anticipation of the business being well placed in the lockdown and, more generally, gaining market share at a faster pace. ‘

He added: ‘Ocado was becoming the UK’s stock market’s most prominent and, arguably, important technology company before the crisis – that status has only accelerated over the past couple of months.’ 

Meanwhile, Russell Pointon, a director at Edison Group, said: ‘The guidance for Retail Revenue for the full year has been withdrawn (prior guidance was growth of 10-15%) due to the uncertainties about how the virus will begin to impact disposable incomes and demand but it is clear that the guidance range will increase and that Ocado is one of the safest places to be from a trading perspective in the consumer area.’

Neil Wilson, an analyst at Markets.com, said: ‘Structurally, Ocado looks perfectly placed to benefit from the new post-Covid-19 world.’