Ocado Retail: Strong Growth With Volumes and Active Customers on the Rise

Ocado Retail, a joint venture between Ocado Group and Marks & Spencer, reported a fourth-quarter trading update for the 13 weeks to Nov. 26, 2023, with retail revenue up 10.9% (versus 5% in the first half and 7.2% in the third quarter) including volume growth up 4.8% and the average sales price up 5.4%. The ASP was lower than market inflation, reflecting the online grocer's efforts toward value perception. Ocado Retail's good performance was driven by: (1) customer growth of 5.9% to 998,000, (2) growth in average orders per week of 6.3% to 407,000, and (3) the average basket value increased by 3.8%—in turn due to the 5.4% higher ASP (lower than inflation) with a flat basket size at 44 items per order, which was stable sequentially. The company maintained 2024 guidance: it expects Ocado Retail to grow at a mid-single-digit rate versus 5% in our model and EBITDA to be positive, mainly driven by improved capacity utilization.