Ocado CFO Andrew Bracey was today (7 September) unfazed by murmurings that Morrisons and Marks and Spencer might be planning to enter the UK online grocery channel.
Speaking as Ocado published its sales figures for the its fiscal third quarter, Bracey said the company would “welcome” any other competitors.
“It may seem strange to say but once you get general adoption of a kind of service, be that groceries being sold online, it will lead to acceleration in that service overall. We’re already happily competing with the largest and best operators in the grocery world, and if others come into the market, we’re interested to see what happens,” he said.
Bracey remained confident about Ocado’s prospects, adding that the retailer seems to be continuing to gain market share.
“If you look at what the analysts say, the view is generally are that we are growing faster than other people in online,” he said. “[Waitrose managing director] Mark Price said at the weekend that he thought the online market would grow at a compound rate of 20% in the future and I think that the analyst view is that we’re taking around 20-25% of that new market share that comes online.”
CEO Tim Steiner also revealed more about Ocado’s plans to expand its own-label range, saying it is on track to reach 250-300 products before the end of the year. The retailer began offering around 70 private-label products around a year ago, including flowers, but will now expand the portfolio, although he declined to give detail on what products would be offered.
Bracey insisted company has no plans to phase out the Waitrose Essentials line, saying that Ocado’s new stable would be at different price and quality points.
According to Bracey, Ocado has benefited from recent developments in Waitrose’s marketing and product range, seeing uplifts in orders of Waitrose Essentials products after an advertising campaign starring celebrity chefs Delia Smith and Heston Blumenthal, as well as seeing gains through the marketing campaign around Waitrose’s new Duchy Originals range.
Announcing its latest numbers, Ocado said its average basket size was down around 1% to GBP113.59. However, Steiner attributed the change to the uptake of its Delivery Pass programme, where customers pay GBP9.99 a month for unlimited deliveries of orders above GBP40.
Despite Ocado’s sales growth in its third quarter and Steiner suggesting that he supported the analyst view that the company should be profitable by 2012, shares in the business are still in freefall.
Following the announcement of its third-quarter results, shares had fallen 4.46% to 150p at 10:28 BST, down significantly on the IPO launch price of 180p a share.
The news is unlikely to improve as Steiner said the rate of sales growth will slow as Ocado passes the anniversary of Sunday trading and the launch of its Delivery Pass. However, he said sales growth is still tracking at 29-30%.
Additionally, RBS analyst Justin Scarborough said that while there could be significant upside in the valuation of Ocado’s shares in the longer term, he did not see “any need to rush in”.
“We believe that investors are likely to get many opportunities below 150p to dip toes into the Ocado pool,” Scarborough said.
However, Steiner remained nonchalant about the share price. “I would be happier if the share price was higher, but we absolutely see the float as a success as we’ve raised the equity we need to grow the business substantially,” Steiner said.