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Ocado Group PLC Confirms Sales Up 16%

The shares of Ocado (LSE: OCDO) slipped 4p to 367p during early trade this morning after the grocery delivery service said its gross sales had improved 16%.

The FTSE 250 member confirmed gross sales during the 12 weeks to 11 August had increased from £163m to £189m.

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The company also said its average number of weekly orders had improved 15% on last year, from 120,494 to 138,889, and that the average order size had climbed £1.10 to £113.54.

Ocado confirmed its deal with Wm Morrison Supermarkets had been completed during the summer, resulting in the receipt of £138m from the sale of a fulfilment warehouse to the supermarket.

The mid-cap revealed its cash position was £115m and borrowings were £49m.

Tim Steiner, Ocado’s chief executive, said:

We are encouraged by the continuing momentum in sales growth, reflecting an increase in both orders and basket size.

We remain focused on improving the proposition to customers to make it easier for consumers to shop at Ocado, from an ever wider range, and at competitive prices. This should support further growth as the demand for online grocery shopping continues.

Prior to today, City experts had been expecting Ocado to report a loss of about £1m during the current year, and deliver a pre-tax gain anywhere between £20m and £30m for 2014.

The terms of the deal with Morrisons and the arrival of former Marks & Spencer boss Sir Stuart Rose as chairman have propelled Ocado’s shares more than four-fold since the start of the year.

However, Ocado’s market cap currently stands at approximately £2.2bn, which may value the group at up to 100 times the forecast profits for 2014.

Of course, whether that valuation, today’s statement and the general outlook for grocery deliveries all combine to make Ocado a ‘buy’ right now is something only you can decide.

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> Maynard does not own any share mentioned in this article.

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