Online grocery's share of UK market set to double, Ocado says

LONDON (Reuters) - Online grocery shopping will double its share of the UK market over the new few years, building on a huge increase during the coronavirus lockdown, internet supermarket and technology group Ocado OCDO.L forecast on Tuesday.

FILE PHOTO: An Ocado truck is seen on the M25 motorway, London Colney, Britain, April 17, 2020. REUTERS/Matthew Childs/File Photo

Industry data shows online orders have surged to account for 13% of all UK grocery spending from 7% before the pandemic.

“We’ll see another doubling of the market in the next few years,” Ocado CEO Tim Steiner told reporters.

He said once (penetration) levels of 20-30% were reached the economics of stores would be challenged. “You’ll then see a continued channel shift to significantly greater market share and ultimately to be the mainstream market share.”

Ocado shares have risen 75% over the last year, giving it a market value of 15.3 billion pounds ($19.2 billion) - more than three times that of Sainsbury's SBRY.L, Britain's second biggest supermarket group by sales.

The stock was down 1.2% at 0950 GMT.

Revenue at Ocado's retail business - now a 50/50 joint venture with Marks & Spencer MKS.L - soared 27.2% to 1.02 billion pounds in its first half to May 31, with growth topping 40% by the end of the second quarter. Core retail earnings (EBITDA) jumped 87.3% to 45.7 million pounds.

“What this shows is that our model for online grocery is adaptable, flexible and sustainably profitable, even in the most difficult of circumstances in contrast to most other operating models,” said Steiner.

Ocado said fees invoiced to overseas technology partners rose 58.2% to 73.7 million pounds as its international roll-out gained pace with the opening of its first robotic distribution warehouses for Casino CASP.PA in Paris and Sobeys in Toronto.

However, group core earnings fell 36% to 19.8 million pounds, reflecting more investment in the technology business.

Having raised 1 billion pounds last month, Ocado ended the half with cash of 2.3 billion pounds.

Reporting by James Davey, editing by Louise Heavens and Mark Potter