Ocado enjoys healthy Q3 sales but analysts left cold

11th Sep 2014 07:51

Retail sales at online shopping group Ocado grew a click faster than analysts expected in the third quarter, with its contract with Morrisons also progressing well.The FTSE 250 company grew total sales, including its contract with Morrisons, by 22.5% to £231.9m in the 12 weeks to 10 August, with direct retail sales growth making up £218.5m, up 15.5% versus consensus forecasts of a 15% rise.Retail sales represent direct orders from customers of Ocado.com and Fetch.co.uk, with the difference of £13.4m showing the new contract with Morrisons plus VAT and marketing vouchers.The platform business with Morrisons continued to successfully scale as demand grew, with the development of a new logistics system, new platform and technology enhancements were "are all progressing well". For its part, Morrisons, which also released results on Thursday, agreed that the roll out was "progressing well" with operations extended from the initial Warwickshire and Yorkshire hubs to Birmingham, Manchester, North London, Sheffield and, since the end of the period, in Lincolnshire.Focusing on Ocado's direct retail sales, average orders per week climbed a healthy 17.4% to 163,000, although the average order size dipped 1.7%.A new directly owned specialist kitchen and dining shop, Sizzle.co.uk, was launched in late August with 12,000 different products.Chief executive Tim Steiner said: "We are pleased with the continued steady growth in our business despite the increasingly competitive nature of the market."He said the company growth demonstrated the ongoing shift from consumers towards online grocery shopping and Ocado, he reiterated, expected to continue growing sales broadly in line with, or slightly ahead of, this online market.Steiner added that the company was committed to improving the quality of its offer to customers in order to support growth and had maintained leading customer service metrics and improved efficiency at its customer fulfilment centres.As at 10 August 2014 cash stood at £78m and external borrowings at £44.9m.Analyst Clive Black at Shore Capital said the numbers remained "underwhelming" but said that recent third-quarter data revealed that Ocado continued to gain market share, "which is commendable".Independent retail analyst Nick Bubb added that the figures "don’t look too bad" but that "given the amount of extra capacity in the business it is hard to escape the feeling that Ocado should be growing more quickly".Shares in Ocado were up 6.6% to 332.4p at 08:23 on Thursday.