Ocado's sales growth hit by lack of delivery drivers

Ocado reported slightly slower sales growth in the fourth quarter as a lack of delivery drivers put the brakes on capacity, though previous falls in the online grocer's average basket size were arrested.

The FTSE 250 group generated revenue of £373.8m in the 14 weeks to 3 December, up 11.6% on the same period last year, which was a slowing from the 13.1% in the third quarter and 12.5% in the first half.

Capacity was curtailed by a lack of drivers in certain locations, which chief executive Tim Steiner said "has now been largely resolved" but can be seen in the slowing of growth in average orders per week to 11.1% from 16% in the third quarter and 15.6% in the first half.

Customers' total average basket size was £106.11 during the period, up 0.3% on last year.

Steiner, still revelling after last month bagging his long-promised major overseas deal with France's Groupe Casino, highlighted by progress made on ramping up capacity at Ocado's "revolutionary" warehouse in Andover, the third of the high-tech company's 'customer fulfilment centres', which he said had supported growth in the UK retail business in the period.

"Over the last few weeks, we have processed over 50% more orders per week through the Andover facility compared to the beginning of the period. We are making good progress with the resiliency issues we highlighted with the third quarter results and although there is still work to do we are on track with our plans," he said.

Work on the fourth CFC, in Erith, in south-east London has continued towards commissioning in 2018, which will process an additional 200,000 orders per week once it is at full capacity.

"Building scale and capacity in the UK will support the sustainable growth of our retail business, enabling us to take further market share in online grocery, and we look forward to the coming year with confidence," Steiner said.

As of 3 December, there was cash and equivalents of £150m on the balance sheet, versus external borrowings of £285.2m.

Ocado shares fell initially before climbing to 343.5p by 0920 GMT, a rise of 0.6% on the day.

As one of the most shorted companies on the FTSE 350, with short interest in the high teens, the Groupe Casnio win saw the shares rally 20% to wipe out £55m from the value of a troupe of bearish hedge funds, according to data compiled by IHS Markit.

Analysts at Shore Capital noted that there was nothing new disclosed on the Groupe Casino deal apart from confirmation that this revenue stream will start to flow through during 2018, as they ramp up their technology platform.

The trading statement was felt to be "solid", ahead of their preliminary results in early February.

"As ever, Ocado remains a story about jam tomorrow and the valuation looks more than up with events. The recent online market data from Kantar showed Ocado slowing to circa 6% growth with the market growth below inflation at only +2.8%.

"The market is anticipating a few more international deals. Ocado needs these in time to be material and, for now, the stock continues to have something of a charmed life."