Ocado reports revenue rise but driver shortage hits sales

The online supermarket said that while the driver shortage had been largely resolved, there was some short-term impact on average orders per week

Ocado is set to open a new distribution centre in Dartford next year (Reuters)

Online supermarket Ocado has reported another quarter of double digit sales growth, but warned that a shortage of delivery drivers was hurting sales.

The group recorded an 11.6 per cent rise in retail revenue to £373.8m in the 14 weeks to 3 December, up from £334.8m in the same period a year ago.

Average orders per week rose 11.1 per cent to 280,000 over the quarter, up from 252,000 in the same period last year, while average order value grew 0.3 per cent to £106.11.

Following the news, shares initially dipped but then rose over 3 per cent.

Despite revenues climbing, Ocado said that a shortage of drivers had held back growth of its retail business.

"While we continue to report sector leading double digit sales growth in our retail business, a shortage of capacity, with the lack of drivers in certain locations being the largest factor, restricted our sales growth,” said Ocado’s chief executive Tim Steiner.

“While this driver shortage has now been largely resolved, there was some short term impact on average orders per week over the period,” he added.

Fiona Cincotta, a senior market analyst at Cityindex, said the driver shortage was caused by surging demand for Ocado’s services as online shopping was experiencing a boom.

“The fact that the firm was ill-prepared and slow to respond to the changing demands of the business was disappointing. This is likely because of the boom in online retail the past few years so the industry has struggled to keep up with demand,” she added.

Last month, the company announced a deal with French supermarket Groupe Casino to use Ocado's e-commerce platform to boost Casino's online business.

As part of the deal, Casino will build a fulfilment centre using Ocado’s mechanical handling equipment. The plant will serve the greater Paris area, the Normandie and Hauts de France Regions.

On Thursday, Ocado said it was making good progress in increasing capacity at its new fulfilment centre in Andover, where goods are delivered, processed and re-distributed, with order processing up 50 per cent since the beginning of quarter.

The group is also planning to open its fourth customer fulfilment centre in South East London in 2018, which will allow it to process an additional 200,000 orders per week.

“Building scale and capacity in the UK will support the sustainable growth of our retail business, enabling us to take further market share in online grocery, and we look forward to the coming year with confidence,” said Mr Steiner.

In the previous quarter, Ocado posted a 13.1 per cent rise in retail revenues to £312.7m.