UK’s Ocado shoppers buying less under pressure from rising costs

BLOOMBERG

Ocado Group Plc said sales rose in the first quarter as new customers signed up to its online grocery business with Marks & Spencer Group Plc amid a rising cost-of-living crisis.
Sales rose 3% on the year before and customers rose by nearly 14% during the period. Ocado expects to build on this momentum to return to sales growth and profitability in the second half, said Hannah Gibson, CEO of the joint venture. Shares in Ocado rose more than 2% in early trading.
Ocado struggled to make the most of the switch to online shopping during the pandemic and since then the cost-of-living crisis has seen it lose customers to cheaper rivals. However, it has been working to improve its price perception. Last month, the company said it would price match Tesco Plc on more than 10,000 products in a bid to win over shoppers.
Data from the British Retail Consortium revealed that food price inflation has hit a record 15%, impacted by fruit and vegetables in short supply, showing the inflationary crisis is far from over. Ocado is also battling some of the same energy and labour cost pressures that have tightened margins at mainstream grocers Tesco and J Sainsbury.
The average number of items purchased per customer fell by 7.5% to 45 in the first quarter as cash-strapped shoppers watched their spending, the company said. But the value of the basket is holding steady for now and Ocado stuck to its previous guidance that its earnings will turn positive in the second half of the year.
The performance of Ocado in the coming months could be key to determining the size of a deferred payment still owed by Marks & Spencer since setting up the joint venture.
Ocado is pausing the opening of some facilities in the northwest and southeast of England because it cannot currently fill that capacity.