OCADO GROUP PLC
6 May 2020
Trading update and business response to COVID-19
Ocado Group plc (“Ocado Group”) issues the following updates on current trading, on behalf of Ocado Retail Limited (“Ocado Retail”), Ocado Group's joint venture with M&S, and a business update for Group, to coincide with the company's Annual General Meeting taking place later today.
Tim Steiner, Ocado Group CEO, said,
“First of all, I would like to thank my colleagues across the business for their hard work, dedication and perseverance. This continues to be a very challenging time for everybody in the world and we are committed to doing our part to help get through this crisis
We are facing quite a different challenge to many, as we scale up Ocado.com to play its part in feeding the nation, and as we help our clients launch and roll out their online businesses more rapidly against a backdrop of a likely long term increase in demand for online.
Ocado remains in a strong position and while we should be grateful that our current challenges are around growth, expansion and increased demand, we have great empathy for all who are facing different challenges at this time. In retail, we are working with our small suppliers to make sure we pay them earlier than normal and we will work closely with any who are struggling”.
Update on Ocado Retail
Throughout the ongoing COVID-19 crisis, Ocado Retail has shown great resilience in its efforts to meet the needs of as many customers in the UK as possible. At the beginning of the outbreak demand increased significantly, almost overnight. Although this has required difficult proactive decisions as we have prioritised our most vulnerable and our most loyal customers, we have adapted our platform rapidly in order to meet unprecedented demand and are now delivering significantly more groceries to households than ever before.
Operating our Retail business safely for our colleagues and customers has been our number one priority. We are protecting customers and colleagues with, amongst many changes, introducing contact-free deliveries to the doorstep of customers' homes, carrying out temperature monitoring at all our CFC and spoke facilities, and now regular testing of our frontline staff for COVID-19. We are also recognising the exceptional contribution of our front line colleagues by giving them a 10% bonus during this period.
Growth in Retail Revenue in the Second Quarter to date is 40.4% up on last year, compared to 10.3% growth in the First Quarter. The number of items per basket appears to have passed its peak but remains high, as more normal shopping behaviours have returned, and the share of fresh and chilled products in the mix, relative to ambient, is also returning to normal.
We continue to price match individual products against our key competitors with the proportion of sales on promotion initially declining in order to discourage stockpiling in line with the industry. Our longstanding Ocado Low Price Promise, ensures that we continue to deliver great value, by sending vouchers to customers in the event their basket is more expensive than a comparable Tesco.com basket.
To support the unprecedented level of business Ocado Retail is doing, Ocado Group has ramped up capacity significantly. Mature customer fulfilment centres (“CFCs”) are running at their peak and at their best ever efficiencies. An example is in Dordon where some weeks we are at close to 200 UPH* which compares to 185 before the crisis. CFC 4, in Erith, South East London, continues to ramp up and is currently processing 110,000 standard sized orders per week versus an equivalent number of 80,000 at the end of the First Quarter. The Ocado Zoom site in West London, an important part of Ocado Group's fulfilment ecosystem, has now achieved planned end game capacity, a year ahead of plan. At the same time, Ocado Retail has taken a number of tactical decisions to protect and increase capacity. Suspending the delivery of mineral water has, for example, allowed us to deliver to 6,000 additional households per week.
Although we expect the long term shift towards on-line grocery to accelerate post-crisis, there remain many uncertainties about the length of the crisis, customer reaction immediately post and its long term impact on customers' disposable incomes and so we have suspended our guidance for Retail Revenue for FY20 until we can accurately forecast likely outcomes.