Robot warehouses help Ocado sales jump in third quarter

Online grocer entered the FTSE 100 for the first time ever earlier this year

Online grocer Ocado reported higher sales in the third quarter of this year, compared with that of last year, and said its new robotic warehouses had helped to drive the improvements.

Revenue rose 11.5 per cent – from £312.7m in the 13 weeks to 27 August 2017 to £348.6m in the 13 weeks to 2 September 2018 – while average orders per week increased by 11.3 per cent from 254,000 to 283,000. The average order size remained relatively flat at £106.26, compared with £106.25 in the third quarter of last year.

Ocado has opened two robotic warehouses in the last year, at Erith in Kent and Andover in Hampshire.

Tim Steiner, Ocado’s chief executive officer, said the new plants were “helping meet consumer demand for our services and drive the channel shift which is transforming grocery retailing in the UK”.

“Ocado’s unique and proprietary technology, which makes these facilities work, is bringing greater value, quality and convenience to British shoppers while at the same time helping our partners redefine the shopping experience for their own customers,” he said.

Shares in Ocado went up 4 per cent in morning trading on Tuesday, as analysts hailed the company’s “fast growth which can only continue to grow into the future as the grocery retail industry transitions towards online channels”, according to Helal Miah, investment research analyst at the Share Centre.

Meanwhile, Laith Khalaf, senior analyst at Hargreaves Lansdown, said “the promise of overseas expansion” was the main reason for the share price surge.

Earlier this year, Ocado stock hit a record high after it announced a new partnership with US grocer Kroger, which will use the UK company’s technology for its own distribution activities.

Ocado subsequently entered the FTSE 100 for the first time, in the June reshuffle of the index.

Mr Khalaf noted that the group’s success came with a price. “Running its large automated distribution centres doesn’t come cheap, and Ocado’s opening of a fourth UK facility in Erith is expected to eat into profits this year,” he said.

“The market won’t mind that too much because it both boosts Ocado’s UK capacity and acts as a shop window for potential overseas partners.

“Given its lofty valuation, Ocado needs to deliver on profits at some point, but in its current expansion phase, shareholders will cut the company considerable slack if it’s using its resources to boost its global footprint.”