UK online grocer Ocado's gross sales increased by 18.6% in the year ended Dec. 1, 2013, to £852.4M, as average orders/week rose 16.2% to 143,000, average order size climbed 1.3% to £113.53

Cindy Allen

LONDON , February 4, 2014 (StockMarketWire.com) – Online grocery group Ocado said gross sales increased by 18.6% in the year to 1st December to £852.4m. Sales growth continued to be driven by rising demand.

Gross sales from retail related activities were £843.0 million, an increase of 17.2%. Sales growth continued to be driven by rising demand with average orders per week of 143,000 up from 123,000 in 2012 and the average order size of £113.53 up from £112.10 in 2012.

The Morrisons agreement contributed £9.4 million of gross sales in 2013. This comprises annual fees for services, IT support and R&D and a recharge of relevant variable and fixed costs and management fees.

Revenue grew by 18.8% (53 week basis: 16.7%) to £792.1 million. There was a change in marketing focus from the second half of 2012 which involved more tailored voucher activity targeted at acquiring new customers rather than reactivating lapsed customers.

Gross profit rose by 21.7% year-on-year to £247.5 million. Gross margin was 31.2% of revenue (2012: 30.5%), ahead of 2012 predominantly due to additional Morrisons gross profit. Average product wastage in 2013 was 1.0% of retail revenue (2012: 0.7%). Wastage costs were higher in the first six months of operations at CFC2 but in the final quarter overall product wastage was 0.7% of retail revenue in line with 2012.

Other income increased to £23.1 million, reflecting a 40.0% increase on 2012. Media income of £18.5 million was 2.4% of retail revenue (2012: 2.3%). Supplier demand for website related activities has grown slightly ahead of the rate of increase in revenue due to the benefits of scale and a wider product range. Other income also included £3.9 million of rental income arising from the leasing arrangements with Morrisons for CFC2.

Operating profit before share of result from JV and exceptional items for the period was £1.0 million, compared with £5.3 million in 2012. The opening of CFC2 increased depreciation costs by £9.6 million in the period.

Tim Steiner, CEO, said:

"Last year the food retail market in the UK was driven by consumers' increasing preference for shopping online. Today the momentum seems unstoppable and, as the market evolves, we are leading the way in delivering market-leading service, innovation, and technology to the benefit of our customers.

"2013 was an extremely busy year for us with significant progress in growing both our customer numbers and average spend thanks to a wider range of products, even better prices, and the fact that we are now even easier to shop. We have continued to grow our general merchandise business, adding depth to the range in certain non-food categories and launching Fetch, our specialist online pet store.

"The successful opening of our new CFC during the year provides us with the capacity to continue to grow and we are well placed to take advantage of significant change in our industry.

"During the year, we also announced a long term agreement with our first strategic client, Morrisons, to provide them with IP and operating services to launch their online grocery business. The efforts of our teams, and the strength of our technology platform, have allowed us to deliver this project successfully in a very short timeframe. This development reflects the increasing demand for online grocery shopping in the UK and internationally, and a validation of the unique technology, IP and operating model pioneered by Ocado. We are confident that we are well positioned to benefit from future strategic developments as online grocery shopping increases in popularity. "

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