Ocado’s revenue rockets in third quarter thanks to robotic warehouses

Food & Drink | Growth | Latest News

OcadoOcado, an online grocer, has revealed a 11.5% rise in its revenue for the third quarter of 2018 – which now stands at £348.6m.

The company has said that the increase is driven by a growth in orders and improved capacity at its robotic warehouses.

Ocado chief executive Tim Steiner said: “The new capacity from Andover and Erith, our robotic third and fourth warehouses, is helping meet consumer demand for our services and drive the channel shift which is transforming grocery retailing in the UK.

“Together, Andover and Erith provide new opportunities for growth in our UK retail business while showcasing the scalability, adaptability and efficiency of our platform.

“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.

“We are on track to deliver a significant number of new customer fulfillment centres for our solutions partners in the coming years and as such are fulfilling our goal of changing the way the world shops.”

Analysis: Chris McCullough, CEO and co-founder at Rotageek

British grocers have been struggling with the march of the discounters, but these figures show the big four grocers can still attract customers into their stores if they play their cards right. As retailers reflect on what contributed to this sales growth, it’s important to look at the bigger picture.

Discounters might be growing their market share, with their obvious cost savings, but that’s not the whole story. Ocado has also reported ever increasing sales, with an average order size of £106.26. In that instance, those shoppers are placing convenience over price – so there’s not a linear story here.

With the critical Christmas trading period around the corner, retailers must evaluate the factors impacting their own business.

Many retailers continue to focus on in-store and customer facing investments, but that won’t generate intelligent insights that can truly impact the bottom line. Investing in data-driven backend technologies can bring much clearer benefits.

It’s time for a technology overhaul, and that means investment in innovative data-driven forecasting and scheduling tools.

That approach can unlock actionable insights so retailers can effectively address inefficiencies and even seize opportunities to capitalise on shifting consumer expectations.

Laith Khalaf, senior analyst at Hargreaves Lansdown

Ocado continues to experience growth in its UK operations, though it’s the promise of overseas expansion which has seen the share price treble in the last year.

The company has signed deals to provide its technology to supermarket groups in Sweden, Canada, France, and, most importantly, in the US. The sudden flurry of deals has no doubt been prompted in part by Amazon’s purchase of Whole Foods last year, which threatens to disrupt incumbent grocery retailers unless they have a top notch online delivery service.

Ocado recently achieved promotion to the FTSE 100 and its equity market value is now greater than the likes of Morrison’s, Royal Mail and M&S. It still needs to turn overseas partnerships into profits, and details of its commercial relationships with US retailer Kroger are still being hammered out.

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. 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.

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