Ocado on track to boost capacity as holiday sales rise

LONDON Tue Jan 15, 2013 10:54am GMT

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LONDON (Reuters) - British online grocer Ocado (OCDO.L) said gross sales rose over 14 percent for the six weeks to January 6 and it was on track to open a new warehouse that will double its capacity.

"We are heading in the right direction," Chief Executive Tim Steiner said.

The company has invested 190 million pounds ($305.3 million) so far in building a second warehouse.

"We're in the final stages of testing the facility now, so it's fully constructed, the software's all in place. We're still hopeful it'll go live in the back end of the first quarter," Steiner said in an interview.

British retailers have been struggling as consumers face job fears and squeezed household budgets. The Christmas trading period highlighted the importance for traditional retailers of an online presence.

Ocado's sales rose 14.2 percent year-on-year to 91.6 million pounds in the six trading weeks to January 6, a "very good festive season", the company said, in which it sold enough mincemeat to make 688,884 pies.

"What we're seeing here is a seismic shift in shopping habits. I think now there's a widespread realisation from the whole of the industry that a substantial part of the market is moving online," Steiner said.

Shares in Ocado rose 2.3 percent to 86.0 pence at 1044 GMT. The retailers index .SXRP was up 0.7 percent.

"This is a pleasing set of numbers from Ocado," Conlumino analysts wrote in a research note. "In many ways the market was firmly with Ocado this Christmas as more consumers than ever shopped online for their food."

The firm, founded in 2000 by three former Goldman Sachs bankers and floated at 180 pence a share in 2010, has polarised opinion like few other market debutantes.

Fans point to rapid growth in online grocery sales and high customer service ratings. Sceptics say filling orders from central depots will never be as profitable as online operations at established grocers, which mostly pick orders in store.

In the six weeks, Ocado added more customers in areas outside London and southeast England than it did within them, a trend for the past three years, Steiner said.

"It continues to be a myth that we're just a London-based company. We are seeing more growth in the areas we haven't traded in for as long," he added.

Gross sales rose 11.4 percent to 716.2 million pounds in the 52 weeks to November 25, 2012, Ocado said.

Steiner said Ocado was not on the lookout for an investor. "Nobody has declared an interest in bidding for our business and we're not looking for anybody to bid for our business." ($1 = 0.6224 British pounds)

(Editing by Kate Holton and Jane Baird)

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