Ocado Group Tumbles on Retail JV Cutting Outlook as Costs Weigh

By Dhirendra Tripathi

Investing.com – Ocado Group's (LON: OCDO ) stock plunged 8% in London trading Thursday after Ocado Retail, the Group’s 50/50 online grocery joint venture with Marks and Spencer (LON: MKS ), lowered its sales outlook for the current year.

The number of customer transactions grew in the first quarter to February 27 but a fall in basket sizes overshadowed that, reflecting softness in retail sales as more customers return to offices and shift to a lower stock level of groceries. 

The joint venture firm said it will now begin to cut costs across the business.

Ocado has lost 45% of its market cap in the last year as labor shortages, capacity constraints, and intense competition have capped its growth.

Rising raw material and food prices, surging energy costs, and the Russia-Ukraine conflict are also adding to the challenges of the company, reports said.

The JV company said it had increased some retail prices, where increased costs could not be mitigated.

Industry data published earlier this month showed British grocery inflation hit 4.3% in February, the fastest rate of increase since 2013, according to Reuters.

Annual revenue growth is now seen closer to 10% compared to the previous forecast of “mid-teens”. 

The average basket size in the quarter fell 15% to 124 pounds ($163). Average orders per week rose almost 12% to 367,500, while active customer numbers grew 31% to 835,000.