(Bloomberg) -- Ocado Group Plc’s shares climbed sharply after its online grocery business lifted revenue guidance on the back of a strong third quarter for the retailer, a favorite of England’s middle classes.
The joint venture between Ocado and Marks & Spencer Group Plc said Thursday that full-year revenue will grow by the low double digits, compared with previous guidance of single digit percentage growth. Shares in Ocado Group rose as much as 17% in early London trading, the sharpest intraday move since July, although it pared gains to trade up 7% by 10 a.m.
The stock is still down more than 45% since the beginning of the year.
Ocado Retail Ltd. struggled after the pandemic as shoppers returned to physical stores but has bounced back in 2024. It’s been the UK’s fastest-growing grocer for seven straight months this year, according to market research company Kantar.
Sales at Ocado’s grocery delivery service rose nearly 16% to £658 million ($871 million) in the third quarter from a year earlier, beating a Bloomberg compiled consensus of £616 million. Its weekly orders grew by close to 15% compared with last year.
“We have seen people switching from all retailers,” said Hannah Gibson, chief executive officer of Ocado Retail, on a call with reporters. Customers have been switching from Tesco consistently for the past 12 months in a row, she said.
Ocado’s average selling price fell by 0.4% during the quarter. Gibson said it would continue to rein in prices more than the industry average.
Ocado Retail may be shooting the lights out on sales but the online joint venture remains weak on profits, according to Clive Black, an analyst at Shore Capital.
While a stronger retail operation was a clear positive, analysts from JP Morgan Cazenove said they awaited further updates on refinancing at Ocado Group in the few next months, and further comments on the mid-term pipeline of Ocado’s tech solutions.
Ocado Retail accounts for most of the revenue of Ocado Group. However, Marks & Spencer has withheld a payment to Ocado related to the performance of the joint venture.
--With assistance from Joel Leon.
(Updates with CEO comments from sixth paragraph and context.)
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