Ocado warns on ‘single digit’ growth as customers cut back on spending

Ocado has warned it expects profit growth for the year to be in “single digits” instead of the predicted 10%, as customers continue to feel the pressure of the cost-of-living crisis.

The online grocer has seen sales fall by 8% in the quarter to 25 April, compared with a 5.7% decrease in the three months prior. It attributed this to a combination of slower growth in customer transactions, and a slightly lower average basket spend.

This news comes as Ocado Retail, which is partly owned by Marks & Spencer, said it now expects sales growth of less than 5% for the year to the end of November.

As food prices have risen, Ocado customers have been placing smaller orders, meaning the value of the average basket was down by about 9% when compared with a year ago.

The group added that this, combined with higher energy bills and food costs for the business, led it to expect the low single-digit earning margins.

READ MORE: Ocado stocks world’s first paper wine bottle

The tech giant revealed that the overall grocery market has declined by 4-5% over the last three months when compared to last year, when the UK was experiencing peak restrictions due to Covid-19 pandemic.

The group said that “the rate of growth has slowed as consumers respond to short-term discounts and promotions”.

As a result, online grocery sales overall have declined by around 20% compared with the same period last year, although the online market remains 60-70% higher compared with two years ago.

Online share of grocery is currently 11-12%; almost double compared to pre-pandemic levels.

Ocado said: “The trading environment has deteriorated with the cost of living crisis compounding the impact of a return to more normal consumer behaviours as restrictions have ended and many people return to the office.”

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