Cost of living crisis affects Ocado’s revenue and profit outlook

UK online grocery chain Ocado Retail has downgraded its outlook for 2022 due to the cost of living crisis.

By saying that customers buy fewer items and choose cheaper products, it means that annual sales will be lower than last year. With declining revenues, its operating result will be close to break-even. Much higher energy costs will affect profits, among other issues.

Ocado reported strong sales in the third quarter with sales up 2.7% to £532m due to record numbers of new buyers coming into the business. Its number of active customers increased by 23% to 946,000 since the start of the year, leading to an increase in average orders per week of 10.7%.

However, the online grocer pointed out that customers are ordering smaller baskets and looking for value-for-money items. This caused the average basket value to drop 6% to £116.

Tim Steiner, President of Ocado Retail, said: “We remain focused on providing Ocado Retail customers with the best possible value to help them through the cost of living crisis, and we are encouraged by the trends positive underpinnings of the business that underscore the value of Ocado’s differentiated proposition to customers.

“As we saw in the third quarter, the number of customers is surging as consumers move away from other vendors or try online groceries for the first time; the underlying productivity in fulfillment and the last mile continues to improve; and Ocado Retail’s new CEO, Hannah Gibson, brings new vision and energy to the business.

“As consumer spending stabilizes, we expect Ocado Retail to once again generate attractive and accelerated sales growth and a strong recovery in profitability.

“For all of these reasons, we are optimistic about the future, although we recognize the challenges that higher energy bills and other inflationary pressures are creating for our customers today.”