Ocado cheers early success of ‘transformational’ M&S delivery launch

Online grocer Ocado has said customers are buying more Marks & Spencer products than they did Waitrose goods, after switching to a new delivery deal with the high street giant this month.

The group said that the weighting of M&S products in the average Ocado basket was higher than Waitrose before the switchover, “reflecting positive customer reaction to the addition of M&S to the range”.

But the firm admitted some shoppers had been left unable to make orders as it struggled to meet demand.

And it was forced to cancel some orders after the launch of the M&S products on its site from September 1, which saw it split from former partner Waitrose.

Chief financial officer Duncan Tatton-Brown insisted the disruption to customers was “very minor” from the switchover, but added “there will be a lot of people who want to order online and can’t”.

“Our service is very much in demand – unfortunately that means we can’t serve all customers,” he said.

He said the group was working to increase its capacity by 40% through to 2021.

Shares jumped as much as 7% as Ocado also said it was expecting strong full-year results, with underlying earnings of at least £40 million thanks to strong retail sales in its third quarter to August 30.

The group said its retail arm – a joint venture with M&S – saw revenues jump 52% to £587.3 million in the 13 weeks to August 30.

It said sales growth picked up on the 40.4% growth seen in the previous three months as the shift to online shopping amid the pandemic showed no sign of slowing, though some of the bounce was also due to fewer customers being on holiday this year over the summer quarter.

The recent sales jump has boosted its earnings outlook, though it added “uncertainties remain over the scale, and duration, of the ongoing impact of social distancing restrictions in the UK”.

The group said its switchover to selling M&S products had seen average shopper baskets rise by around five items and also saw its biggest ever forward order day, on the day of launch.

Melanie Smith, Ocado Retail’s chief executive, added: “These are transformational times for Ocado Retail with M&S products now exclusively available online at Ocado.com.”

The initial range of 4,400 M&S food products replaced about 4,000 Waitrose products.

M&S expects to add about 800 more products to the range in the coming months, including the launch of its Christmas ranges and an Entertain range by Ocado.

Analysts at Peel Hunt said Ocado had enjoyed a “storming” third quarter and cheered the early success of the M&S delivery launch.

They added: “The M&S transition is performing excellently: nearly every customer is already shopping for M&S products and the
weighting in-basket of those products is greater than it was with
Waitrose’s products.”