Ocado warns profits likely to decline amidst rising energy prices

Ocado has warned that rising energy and dry ice costs are likely to weigh on the company's profitability in the final months of the year.

The online grocery retailer recorded a hike in customer orders during the 13 weeks to 28 August, but said that consumers are shopping smaller baskets and seeking value-for-money items as they respond record inflation.

The value of the average basket was down six per cent to £116 in the third quarter of the year – with an even greater decline experienced later in the period during the peak summer holiday season.

Ocado said that a record number of new customers are shopping with the brand, with active customer numbers growing 23 per cent year-on-year to 946,000, driving and increase in average orders per week of 10.7 per cent.

But it explained that despite positive customer growth, the accelerating trading down and smaller baskets, particularly over the past few weeks, means it now expects to see a small sales decline for the year and close to break-even EBITDA.

Ocado plans to invest in price and the expansion of its value-for-money own label range to help support customers during the cost-of-living crisis.

"We remain focussed on providing Ocado Retail customers with the best possible value to help them navigate the cost-of-living crisis, and are encouraged by the positive underlying trends in the business which underline the value of Ocado's differentiated proposition to customers,” said Tim Steiner, chairman of Ocado Retail. "As consumer spending stabilises, we expect Ocado Retail will again deliver attractive and accelerating growth in sales and a strong recovery in profitability.

"For all these reasons, we are optimistic for the future even while recognising the challenges that higher energy bills and other inflationary pressures are creating for our customers today."

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