Ocado slashes sales outlook amid pressure from cost of living crisis

Online grocer Ocado has revealed falling retail sales and cut its full-year revenues outlook as customers rein in spending in the face of soaring cost pressures and return to pre-pandemic shopping habits.

The group said retail revenues dropped 5.7% to £564.7 million in the quarter to February 27 amid a “softening” market overall.

It said food price rises of 4.3% across the sector were impacting wider industry sales, with Ocado having to increase some of its prices “where costs could not be mitigated”.

The group said that this, together with shifting shopper habits since Covid restrictions have eased and as Britons return to offices, mean it now expects annual retail revenue growth “closer to 10%”.

It forecast growth in the “mid-teens” last month.

Shares tumbled more than 5% in morning trading.

Ocado said the war in Ukraine had increased uncertainty over inflation “significantly” in recent weeks.

“The scale of food price inflation over the course of this year, coupled with the overall level of market demand as the cost of living increases, particularly rising energy costs, is difficult to predict,” it added.

Its latest quarter also reflected a tough comparison from a year earlier, when the UK was in lockdown, the group added.

On a two-year comparison, Ocado said sales in its retail division – a joint venture with Marks & Spencer – rose 31.7% over the quarter.

The group added that a 15% drop in customer basket size offset an 11.6% rise in the number of customer transactions.

Melanie Smith, Ocado Retail’s chief executive, said: “The last quarter has been encouraging for Ocado Retail despite the clearly evident challenges the industry and consumers are facing.”

She added: “As we have seen since the end of Covid restrictions, the value of the average basket and shape of the week continue to normalise as we return towards the rhythm of our pre-Covid lives.”