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Ocado Retail Customers Buy Less Per Order As UK Cost-Of-Living Crisis Weighs

British online supermarket Ocado Retail said that its customers purchased fewer items per order in the run-up to Christmas in response to the cost-of-living crisis.

The business, a 50:50 joint venture between Ocado Group and Marks & Spencer, said on Tuesday that its sales rose 0.3% in the fourth quarter to 27 November and were up 15% over the five days before Christmas.

The joint venture's average basket value, however, was down 1.3% in the quarter to £117 ($142.7), as a 7.6% increase in average selling prices was offset by a 8.3% fall in average items per basket.

Shares Tumble 

Shares in Ocado Group tumbled 8% in early trading, shares in M&S were down 1%.

Britain's biggest grocer Tesco and No. 2 Sainsbury's both highlighted more people shopping in stores in their recent Christmas trading updates.

Ocado said its average orders per week in the fourth quarter were 382,000, up 1.9% year-on-year.

That reflected 940,000 active customers at the end of the quarter, up 12.9% year-on-year, offset by reduced frequency in customer shopping compared with the pandemic period.

Ocado Retail's revenue was down 3.8% at £2.2 billion for its full 2021-22 year.

Full year core earnings, or EBITDA, were forecast at close to break even, in line with guidance.

For 2022-23 the joint venture expects 'mid-single digit' revenue growth and 'marginally positive' EBITDA.

Ocado, whose share price has fallen nearly 50% in the past year, said it expects lower basket sizes to persist in the first half of 2022-23, but grow in the second half.

Ocado said that it expects a 'strong recovery' in the 2023-24 year.

Online Grocery Sales 

Online grocery in Britain more than doubled during the pandemic, peaking at 16% of the overall food retail market.

Earlier this month, market researcher Kantar said online's total share was 11.6% in December, down 0.6 percentage points on the year.

The opening of four new robotic warehouses, or Customer Fulfilment Centres (CFCs) as Ocado calls them, since the beginning of 2021 will ultimately bring total capacity for Ocado Retail to around 600,000 orders per week, underpinning revenue growth to £3.9 billion.

While during the pandemic Ocado didn't have enough capacity to meet consumer demand, it currently has surplus capacity, which represents a cost to the business in the short term.

In November, Ocado Retail said it had 'pause' the planned build of two new CFCs in the northwest and southeast of England, reflecting 'a more prudent and disciplined approach to capacity roll-out.'

News by Reuters, edited by Donna Ahern, Checkout. For more retail stories, click here. Click subscribe to sign up for the Checkout print edition.

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