Ocado says will outperform tough grocery market
LONDON (Reuters) - British online grocer Ocado expects to continue growing sales ahead of the overall online grocery market even though competition in the sector is intensifying as traditional rivals cut prices, it said on Thursday.
The firm, whose range includes products supplied by upmarket grocer Waitrose [JLP.UL], has not made an annual pretax profit since it was founded in 2000 but analysts are forecasting one of about 11.5 million pounds for its year just ended, the 2013-14 financial year.
Shares in Ocado, down 24 percent so far this year, were up 0.8 percent at 336 pence at 09:46 a.m., valuing the business at 1.97 billion pounds.
On Thursday it reported slightly slower fourth-quarter sales growth and lower average order size as competition in the sector intensified.
Market leader Tesco , Asda , Sainsbury's and Morrisons have all cut prices in an attempt to stem a loss of market share to discounters Aldi [ALDIEI.UL] and Lidl [LIDUK.UL], and are expected to cut more in the new year.
Ocado's gross retail sales rose 14.9 percent to 311.4 million pounds in the 16 weeks to Nov. 30, its fiscal fourth quarter. That compared with a rise of 15.5 percent in the third quarter. Average order size fell 1.7 percent to 109.74 pounds.
"A business that is growing top line in the mid teens and that’s improving its operating efficiencies means that any pressure on margin is much more sustainable than businesses where their top lines are not growing," Chief Financial Officer Duncan Tatton-Brown told reporters.
Though Tesco and Sainsbury's online sales are currently growing about 10 percent their overall underlying sales are falling.
Tatton-Brown also noted that as Ocado has a bigger range of products than its supermarket rivals it is less affected than most by price cutting activity.
"We will remain competitive whatever the activity is," he said.
(Reporting by James Davey; Editing by Neil Maidment; editing by Susan Thomas)
