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Ocado (OCDO) has posted a slowdown in fourth quarter retail sales growth to 11.6% amid capacity constraints owing to a shortage of drivers.
In a trading update issued this morning Ocado said retail sales were up 11.6% in the 14 weeks to 3 December to £373.8m
Retail sales growth in the third quarter had been 13.1% and the online grocer also achieved 13.1% retail growth in the fourth quarter of 2016.
Ocado insisted “good progress” had been made in improving resiliency at its Andover facility, with average orders per week at CFC3 up 50% since beginning of quarter
Average order size was stable rising 0.3% to £106.11 as inflation picks up, offsetting slight increase of order frequency as more customers take up Ocado Smart Pass. Average orders per week rose 11.1% to 280,00 in the quarter.
Ocado also announced the signing of a crucial international supply partnership with French hypermarket chain Groupe Casino in the quarter and it will begin reporting segmented results for Ocado Retail and Ocado Solutions at its full year results.
Ocado CEO Tim Steiner said: “While we continue to report sector leading double digit sales growth in our retail business, a shortage of capacity, with the lack of drivers in certain locations being the largest factor, restricted our sales growth. While this driver shortage has now been largely resolved, there was some short term impact on average orders per week over the period.
“We are delighted that Groupe Casino chose to partner with Ocado Solutions to develop its online food business and we remain confident in our ability to sign more deals such as this in the medium term. We are also encouraged by the progress we have made ramping up capacity at our revolutionary Customer Fulfilment Centre in Andover which has supported further growth in our retail business in the UK. Over the last few weeks, we have processed over 50% more orders per week through the Andover facility compared to the beginning of the period. We are making good progress with the resiliency issues we highlighted with the third quarter results and although there is still work to do we are on track with our plans.
“We continue to work towards the opening of our fourth CFC, in Erith, South East London, in 2018. At scale, Erith will be able to process an additional 200,000 orders per week. Building scale and capacity in the UK will support the sustainable growth of our retail business, enabling us to take further market share in online grocery, and we look forward to the coming year with confidence.”
Meanwhile, Alex Mahon, non-executive director and senior independent director, has informed the board of her intention to retire from the board with immediate effect.
Lord Rose, Ocado Chairman, commented: “On behalf of the Board I would like to thank Alex for her service over the last five years. We will be sorry to see her retire from the Board but of course understand her desire to reduce her commitments so that she can focus on her new executive role. She has been a wonderful colleague to work with and we wish her the very best for the future. We will begin a search for Alex’s replacement immediately.”
Morning update
Imperial Leather maker PZ Cussons (PZC) has announced that revenue for the half year to 30 November was slightly higher than the prior period with performance “underpinned by a robust and innovative product pipeline”.
However, first half operating profits will be approximately 10% lower than the previous period with strong profitability in Asia offset by reduced margins in some business units in Europe and in particular Africa as a result of the economic environment and competitive trading conditions.
The company said performance in these business units is expected to improve in the second half as a result of new product launches and distribution expansion, together with the usual seasonal uplift in Nigeria.
It said that in the UK, consumers are shopping cautiously reflecting general cost inflation outstripping wage growth, and broader economic uncertainty. This has created “tough conditions in the trade in the first half which has adversely affected performance”, but further brand initiatives are planned for the second half across Imperial Leather, Carex and, in particular, Original Source.
In its crucial market of Nigeria, the Naira has been stable against the US dollar, but the currency’s credit availability in the trade has been tight during the first half and the environment for consumers remains challenging following the very significant cost inflation of recent years.
In terms of outlook PZ Cussons said: “Whilst tough trading conditions are expected to continue for the full year with the consumer under pressure in all markets, brand initiatives planned for the second half are expected to deliver a full year outturn broadly in line with the prior year.”
On the markets this morning, the FTSE 100 has opened relatively flat once more, dropping just 0.1% to 7,492.8pts.
PZ Cussons shares have dropped 4.8% to 312p on this morning’s update. Ocado shares are down 0.4% to 340.4p.
Other fallers include PayPoint (PAY), down 1.9% to 912.5p, C&C Group (CCR), down 1.7% to €2.87 and PureCircle (PURE), down 1.6% to 477.3p.
Early risers include Science in Sport (SIS), up 2% to 76p, CARR’s Group (CARR), up 1.7% to 129p, Glanbia (GLB), up 1.5% to €15.48 and Applegreen (APGN), up 1.5% to 499.8p.
Yesterday in the City
The FTSE 100 edged back 0.1% to 7,496.5pts yesterday.
After wobbling on Tuesday following the Kantar and Nieslen market share data the supermarkets recovered some lost ground yesterday.
Sainsbury’s (SBRY) rose 1.5% to 238.1p, Morrisons (MRW) was up 1.4% to 214.5p and Tesco (TSCO), which avoided the worst of Tuesday’s share price drops, was up 1.3% to 208.4p.
Other risers included Cranswick (CWK), up 2.1% to 3,172p, Dairy Crest (DCG), up 1.7% to 568p, Compass Group (CPG), up 1.5% to 1,532p, Nichols (NICL), up 2% to 1,595p, C&C Group (CCR) up 1.8% to €2.92 and McColl’s (MCLS) up 1.8% to 280p.
Fallers include Imperial Brands (IMB), down 1.2% to 3,067.5p, Britvic (BVIC), up 1.8% to 787.5p, Ocado was down 2.7% before its quarterly trading update this morning.
British America Tobacco (BATS) was down 0.3% to 5,029p after announcing it will post an increase in second half earnings but that currency tailwinds had reduced as the pound stabalised.
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