Ocado sees only temporary setback from Andover fire

Ocado's sales were only slightly dented by the huge fire at one of its robot-operated depots during the quarter, but the full impact is still not yet known.

The online grocery specialist reported 11.2% growth to £404m in the first 13 weeks of its new financial year to 3 March and said the fire at its Andover warehouse has been "a setback, but will be only a temporary one". This growth compared to 12.0% in the fourth quarter of last year and and 11.7% in the first, which included a 1% impact from the Beast from the East bad weather.

The early February fire at the Hampshire warehouse, Ocado's third of four UK 'customer fulfilment centres', removed the equivalent of 1.2% of sales in the quarter, the company said.

A fourth CFC at Erith in south-east London has ramped up to nearly 37,000 orders per week from 30,000 in the preceding quarter and the company's plans to minimise the disruption include setting up a "temporary spoke" in Andover and growing capacity in Erith faster than envisaged.

An investigation into the causes of the fire is still ongoing, with the initial assessment giving management confidence that there are "no significant implications for the risk profile of the assets or the viability of our model".

As well as the examination of the causes of the fire, the company is also analysing the best means of rebuilding Andover and said it will update on its plans to replace the capacity in both the short and medium term and the impact that these will have on its full-year target for 10-15% retail revenue growth.

"Over the last few weeks, our teams have been working hard to minimise any disruption to our customers and we will build a state-of-the-art replacement facility that reflects all the innovations and improvements we have made since Andover opened in November 2016," said chief executive Tim Steiner.

Average orders per week came in at 314,000, up 11.3% from the same period a year ago, but average order sizes was down 0.2% to £110.24.

The period finished with cash of £390.7m in the bank and external borrowings of £288.5m.

Ocado shares hit new all-time high of 1,192 in early trading on Tuesday, up almost 3% on the day.

Broker Numis said it was a "resilient result" given the fire. "We infer a strong underlying growth trend and substantial mitigation of the impacts of the fire, leading us to reverse much of the revenue growth reduction that we put through in late February."

Analyst James Lockyer at Peel Hunt noted that the sales growth was towards the lower end of full-year guidance and compares to consensus forecast of 12.0% and his own for 12.7%.