Ocado PLC (LON:OCDO) shares slipped back on Tuesday after the online grocer said its first-quarter retail revenue increase was in line with the lower-end of its guidance, with trade in the final week of the period impacted by wintry weather.
The FTSE 250-listed group, which last month warned on annual earnings, said its retail revenue rose by 11.7% to £363.4mln in the 13 weeks to March 4, against guidance for the current year of 10%-15% growth, although that was below its 2016-2017 growth rate of 12.4%.
READ: Ocado expects hit to 2018 earnings as it invests in transformation
Ocado said the outcome for the quarter was impacted by adverse weather conditions in the final week, equivalent to nearly 1% of sales, but it benefited from increases to distribution capacity and growth in market share.
The group said overall, average orders per week rose by 11.1% to 280,000, up from 252,000 a year earlier, though order size declined slightly to £110.45, from £110.85 a year earlier, with inflation offset by reduced items per basket.
Tim Steiner, Ocado's chief executive officer, commented: “Looking forward, we continue to make good progress ramping up our revolutionary new customer fulfilment centre in Andover (CFC3) and we are on track to open our latest facility (CFC4) in Erith in the middle of this year.”
He added; “The teams that are delivering the programmes for both Groupe Casino and Sobeys partnerships have been active and making progress. We remain confident that our Ocado Solutions business will be able to do further deals with the momentum of new signings building over time.”
Shares lower; basket scrutinised
In mid-morning trading, Ocado shares were 0.5% lower at 569.4p.
Russ Mould, investment director at AJ Bell said: “Forget the snow impacting Ocado’s earnings; the more interesting fact is the reduction in the number of items per basket.
“A reduced average order size is bad news for companies like Ocado. It isn’t really cost effective to be delivering small orders to lots of different houses.”
He added: “There remains a lot of hype around Ocado and its potential for future growth. As such, its figures will be scrutinised in more depth than a business which has bigger scale and is more mature.”