// Ocado cuts outlook after shoppers trade down amid the cost-of-living crisis

// For the 13 weeks to 28 August, Ocado’s sales were up 2.7% to £532m

Ocado has cut its outlook despite its sales rising after the cost-of-living crisis led to shoppers seeking more value online.

Although the online grocer expects stronger growth in the fourth quarter after record numbers of new customers, it is also anticipating cost headwinds, predominantly energy and dry ice, to weigh on profitability.

For the 13 weeks to 28 August, Ocado’s sales were up 2.7% to £532 million compared with the same quarter last year.

Active customer numbers grew 23% year-on-year to 946,000, driving an increase in average orders per week of 10.7%.

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While customers and orders have grown, consumers are shopping smaller baskets and seeking value-for-money items as they respond to inflationary pressures.

As a result, the value of the average basket was down by 6% in the period, to £116, with a greater decline experienced later in the quarter during the peak summer holiday season.

Ocado Retail chairman, Tim Steiner said: “We remain focussed on providing Ocado Retail customers with the best possible value to help them navigate the cost of living crisis, and are encouraged by the positive underlying trends in the business which underline the value of Ocado’s differentiated proposition to customers.

“Our online grocery model, which creates efficiency through advanced technology, offers customers a combination of competitive prices, the widest ranges, and industry-leading service.

“As we have seen in Q3, customer numbers are sharply up as consumers either switch from other providers or try online grocery for the first time; underlying productivity in fulfilment and the last mile continues to improve; and the new CEO of Ocado Retail, Hannah Gibson, brings fresh vision and energy to the business.

“As consumer spending stabilises, we expect Ocado Retail will again deliver attractive and accelerating growth in sales and a strong recovery in profitability.

“For all these reasons, we are optimistic for the future even while recognising the challenges that higher energy bills and other inflationary pressures are creating for our customers today.”

Ocado said the channel shift from bricks and mortar retailing to online remains an important feature of the food retail industry in the UK, evidenced by the ability of Ocado to attract new customers.

Against a backdrop of reported double digit food price inflation for the market as a whole, Ocado Retail has been working closely with suppliers.

The business has grown the Ocado own-label range, a 750 strong selection of entry level priced goods, by 75 products, and continues to ensure that the core range of anchor products remains in line, or below, pricing represented at our larger UK competitors.

These initiatives come in addition to the ongoing popularity of the M&S own-label which continues to make up around 30% of the customer basket.

Ocado’s average selling price has increased by 5% year on year, which is the net of a 7% inflationary increase in food price offset by a 2% decrease related to customers choosing lower priced alternative products.

Meanwhile, Ocado’s new Zoom facility opened in Canning Town town earlier in the year is ramping in line with plan, with strong feedback from customers, and a new site in Leyton, East London, successfully opened in early September. Two further sites are planned for other UK cities in the next six months.