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magazineOcado benefits from forward buying by UK shoppers
Ocado (OCDO) £13.43
Gain to date: 13.2%
Buy at £11.87, 25 July 2019
Shares in online food retailer Ocado (OCDO) surged after the firm reported (19 Mar) a 10% increase in new orders in the quarter to 1 March and a rise of double that in the first part of March itself as shoppers flooded to its website.
The leap in demand of late, both in terms of number of orders and average basket size, has put the business under ‘unprecedented strain’ according to the statement.
In order to manage the step-change and ensure it can continue to deliver on time, the firm has stopped new customers from registering on its website, installed a queuing system in order to cope with the ‘several hundred percentage increase in web traffic’ and temporarily shut its app so that it can concentrate on web orders.
The firm said that despite the unprecedented surge in orders it hadn’t changed its full year forecast of 10% to 15% revenue growth as it expects what it calls this ‘forward buying’ – a polite term for stockpiling – to unwind at some point later this quarter, particularly in ambient foods.
However, with the UK government tightening its lock-down and requiring people to stay indoors for the next three weeks except for essential business, it’s likely that online ordering will become yet more popular with shoppers.
SHARES SAYS: Ocado is well placed to ride out the coronavirus crisis.
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