Ocado rejects Waitrose threat as sales rise again

By James Thompson
Saturday 05 March 2011 01:00

Ocado yesterday sought to dismiss concerns about Waitrose ramping up its own delivery service inside the online grocer's M25 heartland, as it delivered another sharp jump in sales.

Under a new 10-year supply agreement signed by the two companies last May, Waitrose will be able to deliver from any of its shops inside the M25 from July. While the supermarket has operated its home-delivery service from five shops since 2008, it plans to add 11 stores by the end of March.

Ahead of this, the grocer invested £10m in developing a new website for Waitrose Deliver and some in the City have long-term fears that a full-throttle expansion in and around London could dent Ocado's growth.

However, Andrew Bracey, the finance director of Ocado, which delivers Waitrose and its own-brand groceries, said he was "not at all" concerned.

He said: "Where we and Waitrose operate, what we are seeing – whether it is store-based or online customers – is that we are together taking much more market share and we are taking that from the major supermarkets."

This is partly due to both operators benefiting from the increased visibility of their respective vans in theselocations, he added.

For the 12 weeks to 20 February, Ocado delivered a 24.7 per cent rise in sales to £146.2m, boosted by new customers and its existing ones shopping more frequently. However, the uplift was down marginally from the 29 per cent jump in sales achieved for the year to 28 November.

The online grocer – which has never made a full-year pre-tax profit – said that its average weekly orders jumped by 26.1 per cent to 103,207 over the12-week period. With pressure on household budgets, Mr Bracey also said there had been a shift to customers purchasing Ocado's own-brand products and goods from the WaitroseEssentials value range.

The average value of orders made with Ocado slipped by 1 per cent to £118.06 over the 12 weeks, largelyreflecting the increased take-up of the online grocer's delivery pass that has led to more frequent ordering. Mr Bracey said: "We are increasinglybecoming the online supermarket of choice for Middle England."

Ocado – which floated at 180p in July and posted its first quarterly pre-tax profit of £400,000 in the fourth quarter last year – continues to deliver an improved conversion rate between earnings before interest, tax, depreciation and amortisation and sales. Shares in Ocado, which operates from a hi-tech distribution centre in Hatfield, Hertfordshire, rose 2p to 212.5p.

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