Online grocery delivery firm Ocado (OCDO) served up three lots of good news on Tuesday with accelerating sales growth in the third quarter, a better than expected take-up of Marks & Spencer (MKS) products on its retail platform and an increase in full year earnings guidance. Shares jumped 5.5% to £24.83 to top the FTSE 100 leader board.

In the 13 weeks to 30 August, retail revenue rose 52% to £587m marking a further acceleration from the second quarter’s exit rate of 40% growth thanks to the continued shift among consumers to online grocery shopping.

The average order size of £141 remained above pre-crisis levels while the volume of weekly orders rose 9.6% to an average of 345,000 during the quarter.

ON YOUR MARKS

The switchover to M&S products on 1 September generated a highly positive response with the new range driving both an increase in the number of products in customer baskets and strong forward orders.

The weighting of M&S products in the average Ocado basket is also higher than the weighting of Waitrose products previously, helping lift M&S shares 5% to 110p.

Melanie Smith, chief executive of Ocado Retail, said: ‘Excitement around the launch of M&S products has increased the average basket by around five items and is driving strong forward demand including our biggest ever forward order day, on the day of launch. 98% of customers are already shopping M&S.’

As well as groceries, Ocado is selling 700 M&S Home & Lifestyle product lines in categories such as toiletries, baby, kitchen and household.

RAISING GUIDANCE

Rounding out the good news, the firm said that thanks to the strong performance of its retail arm in the first three quarters and its operational leverage, full year group earnings before interest, taxes, depreciation and amortisation (EBITDA) would be ‘at least £40 million’ compared with a consensus forecast of £26 million and a top estimate of £34 million, according to the company’s website.

Even long time Ocado bear Clive Black of Shore Capital was complimentary about the firm’s performance: ‘The group and its online solutions are in the right place at the right time for the shifts taking place in the food systems of advanced nations. Hence, credit where credit is due but also, against convention, we re-state the point that if one cannot be good, then be lucky.’

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Issue Date: 15 Sep 2020