Ocado hit by snow in first quarter as new centres ramp up

Ocado's first quarter saw revenues fall from the preceding quarter but improve compared to the start of last year as heavy snow across Britain disrupted the final week to knock nearly 1% off sales.

Retail revenue of £363m in the 12 weeks to 4 March was up almost 12% year-on-year but down nearly 3% quarter on quarter.

Average orders per week came in at 280,000, which was unchanged on the preceding quarter but up 11% on the first quarter last year. Order size of £110.45 was down slightly year on year, but was up from £106.11 from the fourth quarter.

After raising £143m in new cash from institutional investors last month, by 4 March 2018 Ocado had cash and cash equivalents of £259.7m in the bank and external borrowings of £285.2m.

The fundraising was sold on the back of two major overseas deals with retailers in France and Canada, where up front investment capital expenditure will be needed before they're up and running. Also, chief executive Tim Steiner wanted to increase technology engineering and software capabilities and bring forward investment in its revolutionary, robot-run 'customer fulfilment centres' at Erith in south London and Andover, Hampshire.

On Tuesday, having operated its current distribution warehouses "at maximum capacity" for most of the quarter, Steiner reported "good progress" ramping up Andover and was "on track" to open Erith "in the middle" of the year.

Programmes for the France deal with Groupe Casino and Canada's Sobeys are "active and making progress", with Steiner's confidence in further deals not ringing hollow in investor ears any longer.

"Taking advantage of the opportunities ahead of us is both challenging and exhilarating. The business is firmly looking forward," he said.

Ocado shares fell more than 2% to 559.4p on Tuesday morning.

Broker Shore Capital said the numbers were "slightly softer" than the 13% run-rate and noting the snow affected the company more than retail rivals where online orders are fulfilled at their stores. "Given the central pick model by Ocado they have further to travel to fulfil customer orders than more local store picking models operated by others."

With Ocado saying it was running at maximum capacity for most of the quarter, similar to Q4, analyst Clive Black said: "Ramping up Andover and Erith will free up more delivery slots but, as ever, with Ocado it is always the promise of jam tomorrow. Time will tell if Andover can overcome its technology glitches that have beset it from the beginning but Erith’s opening later this year will allow the company to rebalance customer orders across its network."