Ocado halves its growth forecast due to the cost of living crisis and returning to offices

Ocado warned that its revenue growth would be less than half the rate it had hoped for as the business was hit by a cost-of-living crisis and a return to office work and dining.

The online grocery store, which is partly owned by Marks & Spencer, said it now expects growth of less than 5% a year by the end of November, compared to the expected 10%.

The forecast came after sales for the two months to April 25 fell by 8% compared to a decrease of 5.7% in the previous three months. Shoppers buy fewer items than usual.

“The business environment has deteriorated,” Ocado said in a statement, “with a cost-of-living crisis that has multiplied the impact of a return to more normal consumer behavior as restrictions have ended and many people have returned to the office.”

Ocado, which switched to a partnership with M&S in September 2020 after 20 years of Waitrose food sales, said it continued to gain market share, but the online food market fell by 20% year on year as people returned to shopping habits that were similar to those before. pandemic.

Online food sales increased during the peak coronavirus crisis as shoppers wanted to avoid overcrowded supermarkets and more people were able to accept home deliveries as they switched to work or study from home.

While the online food market remains at least 50% higher than before the pandemic, sales have fallen back to around 12% of total food sales in recent months, after peaking at more than 14% two years ago.

Ocado said that as retail food prices rose by about 4% or 5%, customers ordered one or two items less in each store than before, so the value of the average cart fell by about 9% compared to the previous year .

He added: “The business fundamentals are strong and Ocado Retail believes that sales and [underlying profit] The contribution will follow a still positive trajectory in the medium to long term.

Steve Rowe, CEO of M&S, said the decline in sales was a “short-term reversal” and that it was “clearly the right thing for the retailer” to buy a stake in Ocado and start selling food online.

Eoin Tonge, CFO of M&S, added that the company expected Ocado to regain its former profitability in three or four years. “Its offer is relatively unique in terms of scope and level of service, and we feel it can compete very well in this market,” he said.

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