Ocado set to cash in on second UK lockdown as profit expectations rise

Following today’s release of Ocado figures for Q4 FY2019/20;

Thomas Brereton, Senior Retail Analyst at GlobalData, a leading data and analytics company, comments:

Ocado’s Q4 results, covering September to November (which includes the UK’s second official lockdown period), are very much in line with expectations of a bulging online grocery market. Revenue rose 34.9% to £579.6m, supported almost entirely by growth in average basket size (£133 across Ocado and Fetch) as shoppers transferred food spend from hospitality and foodservice to traditional retail. As a result, Ocado now expects full-year EBITDA to climb above £70m – a significant increase on the £40m expected pre COVID-19.

“How Ocado will fare in 2021 depends heavily on the macroeconomic kickback from coronavirus. Although Ocado are pressing ahead with plans to open three new UK warehouses next year – increasing capacity by c.40% – the UK grocery market will be heavily focused on promoting value above all else, an area that Ocado will struggle to compete in with its mid-to-premium price proposition. Ocado also found it more difficult to match soaring demand throughout the year than its competitors – hampered by its comparatively inflexible distribution model – and will need to manage any decline in online grocery demand going into 2021 carefully to avoid wasted efficiency and whittle away any auxiliary profits it expects this year. Any difficulties will also be exacerbated by the efforts of direct competitor Waitrose to quickly grow its own online offer, which recently reached the landmark of £1bn annualised sales and has aims to expand by at least another 50% soon.”

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