Ocado sees return to annual earnings as sales leap

The firm said it would meet its forecast to return to earnings for the full year to November 26 after the fourth-quarter performance saw annual sales rise 7 per cent overall.

The business has been looking to boost trade after slumping to a half-year loss of £2.5m, by cutting its own costs and focusing on price reductions across hundreds of items to win back shoppers hit hard by the cost-of-living crisis.

It said: “Our trading performance, and our focus on costs, has translated through to our bottom line, returning to positive EBITDA for the full year.”

The group also said it achieved record Christmas trading, which fell after its year-end, with Ocado Retail hitting its highest level of sales, with a 7 per cent rise between December 20 and 24.

Ocado said prices rose 5.4 per cent on average year-on-year across its products in the three months to November 26, which it said was below inflation in the wider market.

It marked a sharp fall on the 8.4 per cent price inflation seen in the previous quarter.

Sales by volume lifted 4.8 per cent in its fourth quarter but basket sizes continued to fall, down 1.6 per cent in the quarter due to cost-of-living pressures and as shoppers continued to change their buying habits following the pandemic.

Hannah Gibson, Ocado Retail chief executive, said the group made “significant progress in 2023” and was “pleased to have finished the year with strong momentum”.

For the new financial year, Ocado Retail is forecasting revenues growth in the “mid-high single digits”, with further gains held back by moves to keep prices low.

It said: “We expect the positive trends in customer acquisition to lead to sustained volume growth in 2023-24.

“Revenue growth is likely to be impacted by lower growth in average selling price however, as we invest in value and as food price inflation continues to subside.”

Julie Palmer, partner at Begbies Traynor, said: “Ocado Retail has posted a robust update showing it reaped the rewards of the busiest Christmas period supermarkets have experienced since the pandemic. “Yet the key question is whether it can keep up the momentum during seasonally tougher trading periods or it will return to being a drag on M&S’ otherwise sparkling performance.

“Though the e-commerce giant has sought to drive growth with another dose of price cuts, it faces a continued battle with the shift away from online grocery shopping that has afflicted Ocado since the pandemic and through the cost of living crisis.

“The enduring appeal of in-store experiences during the festive season, providing a chance to save on delivery costs and see promotions, has positioned M&S as the preferred choice for consumers.

“In the wake of the festive season, Ocado will have to find ways to continue its positive momentum and attract customers that are heading to physical stores for their weekly shop.”