Ocado’s retail arm returned to the black last year as customers had more M&S food options and shoppers switched back to online grocery shopping after a post-pandemic slump.
The group, which is a joint venture between Marks & Spencer and the technology company Ocado Group, said price matching with Tesco and better service had also helped increase sales, while the closure of an old warehouse helped cut costs.
More efficient ways of working, including new robotic picking arms and the opening of a new hi-tech warehouse, have helped to keep costs down, with Ocado requiring just 10 minutes of human labour time to pick a 50-item order compared with more than an hour for supermarkets that fulfil online orders from stores.
Sales rose by almost 11% to £609.4m in the three months to 26 November, the fourth quarter of growth and a step up from the previous three-month rate of 7.2%.
Growth was helped by a 5.4% increase in average selling prices but the number of items sold also rose, by 4.8%, as Ocado attracted more shoppers and the number of items bought by each shopper remained roughly stable – down just under 1%.
The strong end to the year helped lift annual sales by 7% to £2.4bn as Ocado Retail said it had increased its share of the online grocery market to 12.7% and was now profitable. Details on profits will not be released until next month alongside figures for its co-parent Ocado Group.
The figures came after a “challenging year” in 2022 when the retail arm sank £4m into the red as customers put fewer items in their baskets and used more discount vouchers during the cost of living crisis. Ocado Group dived to a £500m loss that year.
Ocado expects sales growth to rise by a similar level in the year ahead – in line with City expectations – as easing food price inflation offsets higher growth in the volume of items sold.
The Ocado Retail chief executive, Hannah Gibson, said the group expected profits to increase in the year ahead after a strong Christmas. “More people had people around for dinners,” she added.
She said that while some traditional snacks such as pigs in blankets sold well year on year there were also signs that shoppers were “doing things differently”. They bought more beef centrepieces instead of turkey and chocolate pudding instead of traditional Christmas pudding as they were “exploring more of the range” on offer at Ocado.
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Gibson said: “We made significant progress in 2023. We have focused first and foremost on being a great shopkeeper, improving our unbeatable range, great value and unrivalled experience – all underpinned by improved cost efficiencies.”
She said the shoppers’ behaviour had returned to normal after the Covid pandemic lockdowns, when there was a massive shift to online shopping followed by a big drop back. “We are beginning to get back to structural growth in online grocery. We are already beginning to see online outpace [in store shopping] and we expect that shift to continue,” she added.
Ocado last year paused plans to open new warehouses and Gibson said the group did not expect to open or close sites in the near future as it focused on getting the most out of its existing facilities, introducing further automation.
Ocado shares were up more than 7% on Tuesday morning, making it the top riser on the FTSE 100.
