Ocado Group PLC Delivers 15% Sales Growth

Ocado Group PLC (LON: OCDO) looks to scale by partnering with international retailers.

Mark Stones

Mark Stones (TMFMumbojumbones) joined The Motley Fool in 2014 and initially worked as a writer for Fool.co.uk, before joining the Fool’s analyst programme. Mark earned a BA in English from Loughborough University. Although he spends more time reading annual reports than Russian literature these days, he still appreciates a novelist’s antipathy toward the accepted view, which is a useful attitude when trying to sniff out hidden gems on the stock market. His approach to investing has been largely influenced by the principles of Warren Buffett and Peter Lynch. He also takes a special interest in the work of healthcare companies. Outside of investing, Mark plays guitar, enjoys good writing and has a guilty passion for combat sports.

Published 11 September, 2014 12:55 pm BST

| More on: OCDO

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Shares in Ocado (LSE: OCDO) increased by 4% to 325p in early trade — making the online grocer the biggest FTSE 250 riser. Sales rose by 15.5% to £218.5m in the three months to 10 August, but price competition had a negative impact on average order size, which fell 1.7% to £112.

“We are pleased with the continued steady growth in our business despite the increasingly competitive nature of the market,” the chief executive, Tim Steiner, said.

The grocery sector has seen an increased level of promotional activity — with Tesco and Morrisons cutting prices as discount rivals Aldi and Lidl gain market share. Ocado added that intends to grow sales “broadly inline with, or slightly ahead, of the online grocery market”.

Ocado’s tie up with Morrisons continues to scale successfully with demand, which could lead to similar partnerships with other retailers in the future. The company will start building a third distribution centre this year as it looks to begin providing logistics for overseas retailers.

Ocado is trading on a price-to-earnings ratio of 70 for the year ended 2015. Overpaying for a company is a risky, and the decision to ‘buy’ — depending on if you believe the company can live up to these expectations — is solely down to to you.