Ocado sees Q3 sales jump as consumers snap up M&S products
Online grocer Ocado has said customers are buying more Marks & Spencer products than they did Waitrose goods, after switching to a new delivery deal with the high-street giant this month.
The group said that the weighting of M&S products in the average Ocado basket was higher than Waitrose before the switchover, "reflecting positive customer reaction to the addition of M&S to the range".
But the firm admitted some shoppers had been left unable to make orders as it struggled to meet demand. And it was forced to cancel some orders after the launch of the M&S products on its site from 1 September, which saw it split from former partner Waitrose.
Chief financial officer Duncan Tatton-Brown insisted the disruption to customers was "very minor" from the switchover, but added "there will be a lot of people who want to order online and can't”. He added: “Our service is very much in demand - unfortunately that means we can't serve all customers.” He said the group was working to increase its capacity by 40 per cent through to 2021.
Ocado also said it was expecting strong full-year results, with underlying earnings of at least £40 million thanks to strong retail sales in its third quarter to 30 August. The group said its retail arm - a joint venture with M&S - saw revenues jump 52 per cent to £587.3 million in the 13-week period.
It said sales growth picked up on the 40.4 per cent growth seen in the previous three months as the shift to online shopping amid the pandemic showed no sign of slowing, though some of the bounce was also due to fewer customers being on holiday this year over the summer quarter.
The initial range of 4,400 M&S food products replaced about 4,000 Waitrose products. M&S expects to add about 800 more products to the range in the coming months, including the launch of its Christmas ranges and an Entertain range by Ocado.
Arlene Ewing, investment manager at Brewin Dolphin, said: “Today’s update from Ocado is all about the transition to M&S’s product range, which has been highly anticipated. While there were reports of some teething issues, the early indications are that the switchover has been a success and some of the figures related to M&S’s products are encouraging.
"With a strong balance sheet and buoyed by the pandemic’s super-acceleration of structural changes in the retail sector, Ocado is in a great position as it approaches the pre-Christmas period.”
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