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Ocado sales surge 14.4% in Q1

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Online grocer Ocado has today reported a 14.4 per cent rise in gross sales to £185.5 million in its first quarter.

In the 12 weeks to February 24th 2013, average orders per week grew 12 per cent to 130,995 with the average order size increasing 2.2 per cent thanks to the opening of the e-tailer’s second fulfilment centre, which became fully operational over the period.

Based in Warwickshire, the fulfilment centre opened last month and Ocado noted that sales are “progressing well”.

Ocado CEO Tim Steiner said of the opening: “We successfully opened CFC2 last month on time and on budget, and this substantially increases our capacity to serve the growing demand from many more customers who like shopping online for their groceries.”

Continuing to build its non-food offering, Ocado opened its first dedicated non-food distribution centre a month ahead of schedule in January in order to support its growth strategy for the range and Steiner noted that such improvements have helped drive sales across the business.

“We maintained the momentum in sales growth and new customer acquisition with which we entered the year,” Steiner said.

“Further improvements to the proposition to customers that we are making this year should enhance our appeal to shoppers and enable us to continue this momentum.”

Earlier today, it was announced that Ocado is in discussions with supermarket Morrisons as the latter seeks to license Ocado’s technology to kick-start its multichannel operations.

However, experts have warned that Ocado must do more to build profitability as John Ibbotson, Director of Retail Consultants Retail Vision explained.

“A 14.4 per cent uplift in sales in the first quarter will not alter the fact that the millions invested in Ocado is unlikely to see a satisfactory return. The online retailer remains under the cosh.

“It’s crunch time for Ocado. Everything now depends on the performance of its newly opened 350,000 sq. ft. Dordon distribution centre in Warwickshire.

“Will it ever justify the £210m spent, especially given that rivals Tesco, ASDA and Sainsbury’s have a much more efficient model? Even its Hatfield distribution centre is under-utilised.

“The rise in the share price since November is due to speculation that Marks & Spencer or Morrisons will buy it. Both lack an online food proposition, but will they put their hands in their pockets?

“It certainly looks like Morrisons won’t pay as it has announced a technology agreement with Ocado only and Ocado has ruled out an equity stake.

“Morrisons has good distribution in place and could deliver from its stores, so why spend millions on added distribution centres?”

Published on Thursday 14 March by Editorial Assistant

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