Ocado upbeat after warehouse boost

OcadoOnline grocer Ocado has said its operational problems were largely behind it as it looks to focus on driving sales growth this year.

The retailer, which delivers Waitrose and its own products to much of the UK, is looking to bounce back from a loss of £2.4 million in 2011 after it struggled with capacity constraints at its Hatfield distribution centre.

It fuelled hopes of a turnaround, leading to a 3% rise in its share price, as better levels of capacity at Hatfield led to an 11% rise in gross sales to £162.1 million for the 12 weeks to February 19.

Chief executive Tim Steiner said: "Evidence suggests we have largely overcome the operational challenges we faced in expanding our Hatfield capacity in the second half of 2011, and are set to meet growing demand through the rest of the year."

He said Ocado expects to see an acceleration in sales growth as the year progresses.

The average order size for the 12 week period was £115.49, down from £118.06 a year earlier, but the average number of orders per week increased by 13.4% to 116,987.

Mr Steiner added: "Despite the continuing economic headwinds in the UK, more and more consumers are seeing the benefits of online grocery shopping, and in particular, the service that we offer."

A second distribution centre at Dordon, Warwickshire, is due to open in the early part of next year.

Despite the improvement, Panmure Gordon analyst Philip Dorgan retained his sell rating on the stock and said Ocado will continue to struggle to make money.

He added: "Moving forward, we expect that the competitive environment will get tougher and that Ocado will struggle to demonstrate operational leverage."

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