With the novel coronavirus pandemic continuing to generate huge demand for home delivery, its annual earnings forecast was raised for the second time in two months on Thursday by the British online supermarket Ocado Group.
A forecast of earnings before interest, tax, depreciation and amortisation (EBITDA) of “over 70 million pounds” ($93 million), compared to its previous forecast of “over 60 million pounds”, was made by Ocado. The company’s EBITDA in 2018-19 was 43.3 million pounds.
During its fourth quarter ending November 29, there was a 34.9 per cent growth in revenues at its retail joint venture with Marks & Spencer at 579.6 million pounds, said the group whose share price has risen by 82 per cent so far this year.
Compared to the 52 per cent in the third quarter, growth was moderate in the latest completed quarter with Ocado saying that the results of the third quarter showed the seasonality of the quarter.
During the fourth quarter, a 3 per cent rise in average orders per week at 360,000, and average order size at was 133 pounds was reported by the company.
The Ocado Retail venture changed from using Waitrose to M&S products in September.
“Customers continue to embrace the full M&S range with the biggest selling lines coming from everyday essentials in the M&S fresh categories,” Ocado said.
The extent to which it returns to a “normalised” trading week will largely determine sales and earnings growth in the 2020-21 financial year, Ocado said, as well as on when its planned additional capacity becomes active.
In 2021, the company plans to open three new warehouses with will be able to increase capacity of the company by 40 per cent. The ability of the company to increase its capacity quickly to respond to the increased demands during the novel coronavirus pandemic was restricted by the capital-intensive and centralised fulfilment model that is followed by the company.
In comparison, the rivals of the company including the four big grocers of the United Kingdom – market leader Tesco, Sainsbury’s, Asda and Morrisons – were helped by their predominantly store-pick models to quickly adapt to the new normal and thereby to boost capacity. This also helped the companies to deliver faster growth and win share of the online market.
Since the start of the pandemic, with a share of almost 14 per cent of the total retail grocery shopping, online grocery shopping has almost doubled its share in the UK market. According to estimates of Ocado, that could reach as much as 30 per cent over the next few years.
(Adapted from Nasdaq.com)