M&S products sell better than Waitrose’s so far, says Ocado

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Ocado suggests customers are flocking to M&S products as it reveals summer sales jumped more than 50%

  • Ocado said customers have responded positively to the M&S launch
  • Average basket increased by around 5 items thanks to launch of the M&S range 
  • Sales rose 52% to £587.3m in the three months to the end of August
  • Ocado was top performer of all UK supermarkets, according to Kantar
  • But UK grocery sales overall have slowed down in August as people ate out more

By Camilla Canocchi for Thisismoney.co.uk

Published: | Updated:

Shoppers have flocked to order more food from Ocado’s new partner, Marks & Spencer, than they did from Waitrose, the online grocer-cum-tech company said.

Despite struggling to keep pace with orders during lockdown and facing similar issues after the M&S launch on 1 September, Ocado said ‘excitement’ for the new M&S range had seen an increase in the number of products bought.

‘Customers have responded positively to the switchover to M&S products on the 1st of September, with demand for the new range driving both an increase in the number of products in customer baskets and strong forward demand,’ Ocado said.

‘Strong demand’: Ocado said a ‘normalising’ of online shopping contributed to a rise in sales

The average basket increased by around 5 items thanks to the launch of the M&S range, Ocado said, and added: ‘The weighting of M&S products in the average Ocado basket is higher than Waitrose prior to the switchover’. 

Ocado updated on the new joint venture along with its third quarter results which show a 52 per cent increase in retail revenue during the three months to the end of August, when it raked in £587.3million in sales. 

Ocado was also the fastest growing retailer over the past 12 weeks, with sales up by 41.2 per cent year on year, according to industry figures released today. In comparison, grocery sales across UK supermarkets rose 10.8 per cent in the 12 weeks to September 6th, Kantar data show.

Neil Wilson, an analyst at Markets.com, notes how this ‘indicates Ocado is significantly outperforming’ the rest of the industry. 

Average orders per week increased 9.6 per cent in the quarter to 345,000, which Ocado said was down to a ‘combination of strong demand, a phased reopening of the website to new customers, and a normalising of shopping patterns’. 

It now expects full-year underlying earnings of at least £40million thanks to the strong retail performance, though it added ‘uncertainties remain over the scale, and duration, of the ongoing impact of social distancing restrictions in the UK’.  

The initial range of 4,400 M&S food products replaced around 4,000 Waitrose products.

M&S expects to add around 800 more products to the range in the coming months, including the launch of its Christmas ranges and an Entertain range by Ocado.

Average orders per week increased 9.6 per cent in the quarter to 345,000

Average orders per week increased 9.6 per cent in the quarter to 345,000 

Analysts say Ocado is well positioned to benefit from the key Christmas season.

Emma-Lou Montgomery, associate director from Fidelity Personal Investing’s share dealing service said: ‘The all-important Christmas period, albeit probably a COVID one this year, is around the corner. And […] the stage seems set to be a bumper one for M&S – and as a result, also Ocado.’  

Arlene Ewing, investment manager at Brewin Dolphin, added: ‘With a strong balance sheet and buoyed by the pandemic’s super-acceleration of structural changes in the retail sector, Ocado is in a great position as it approaches the pre-Christmas period.’ 

The initial range of 4,400 M&S food products replaced around 4,000 Waitrose products

The initial range of 4,400 M&S food products replaced around 4,000 Waitrose products

But Russell Pointon at Edison Group, said it is still to be seen whether Ocado can cope with increased demand.

Ocado had to cancel ‘a very small number of orders’ as a result of the demand on the day of the launch of the M&S deliveries, although it stressed the ‘vast majority’ of orders had been unaffected. 

Chief financial officer Duncan Tatton-Brown said the group was working to increase its capacity by 40 per cent through to 2021. 

Pointon said: ‘Going forward, investors will be keeping a close eye on the company’s level of demand and if it can be sustained, particularly following the extensive advertising campaign ahead of the launch.’

Ocado shares rose 5.3 per cent to £24.80, while Marks and Spencer’s shares rose 4.8 per cent to 109p in morning trading on Tuesday.  

Supermarket sales growth slows as shoppers eat out

Growth in supermarket sales slowed down in August because of the Eat Out to Help Out scheme, with sales down £155million compared with the July period, according to the latest figures by Kantar.   

Grocery sales increased by 10.8 per cent over the past 12 weeks to September 6, but saw growth slow to 8 per cent in August.

Fraser McKevitt, head of retail and consumer insight at Kantar, said: ‘Grocery growth tailed off in August as the Government’s Eat Out to Help Out scheme got under way and people were encouraged to return to offices and resume normal routines.’

‘Diners’ confidence built throughout the month and footfall increased during each week of the scheme, culminating in the final bank holiday Monday when dining out accounted for a two-and-a-half-times greater share of consumer spend than the pre-Covid average.’  

As we’ve seen, Ocado was the top performer with sales jump 41.2 per cent. 

Morrisons was the strongest performer among the ‘Big Four’ over the past three months, as sales jumped by 12.9 per cent.

Tesco reported 10.5 per cent growth with rivals Sainsbury’s and Asda seeing sales increase by 8 per cent and 6.3 per cent respectively.

The Co-op and Iceland were also particularly strong performers, as their sales grew by 13.4% per cent and 20.8 per cent respectively over the quarter. 

Waitrose, the former partner of the Ocado, saw sales rise by 7.3 per cent as it was buoyed by the rapid growth of its Waitrose.com online offering.

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