March 20, 2018 / 11:00 AM / in 10 months

Ocado's sales growth dented by Beast from the East

LONDON (Reuters) - Online supermarket Ocado (OCDO.L) said on Tuesday its quarterly sales growth and profit were dented by snow storms that froze Britain in early March.

FILE PHOTO: An Ocado truck returns to the Ocado depot in Hatfield, southern England July 21, 2010. REUTERS/Suzanne Plunkett/File Photo

The blast of Siberian winter, dubbed the Beast from the East, disrupted deliveries, reducing Ocado’s profit by 1.5 million pounds, according to Chief Financial Officer Duncan Tatton-Brown.

In December, Ocado said a driver shortage had slowed sales growth in the fourth quarter of its 2016-17 year, and last month it warned on 2017-18 core earnings due to increasing investment needs.

Over the 13 weeks to March 4, its fiscal first quarter, retail revenue rose 11.7 percent to 363.4 million pounds, below the 2016-17 growth of 12.4 percent.

“The last week of the quarter was impacted significantly by the Beast from the East when we saw a big drop in the number of orders fulfilled – tens of thousands, equivalent to nearly 1 percent of our sales over the 13 weeks,” Tatton-Brown told reporters.

Ocado held back delivery slots and allowed for slower road speeds and fewer drops per van, accounting for half of the lost orders. The other half was caused by deliveries Ocado was unable to make and orders cancelled when smaller distribution sites were cut off.

The quarter was still in line with Ocado’s guidance for 2017-18, Tatton-Brown said: growth of 10-15 percent as it increases distribution capacity and market share.

“Overall we’re pleased with our progress in the quarter,” he said.

Ocado is seeking to sell its proprietary technology to international supermarkets. It agreed three international partnerships over the last year, doubling its share price.

It signed a deal with Canada’s Sobeys (EMPa.TO) in January and one with France’s Casino (CASP.PA) in November.

“We remain confident that our Ocado Solutions business will be able to do further deals with the momentum of new signings building over time,” said CEO Tim Steiner.

Prior to Tuesday’s statement, analysts were on average forecasting 2017-18 core earnings of 87.1 million pounds, up from 84.3 million pounds in 2016-17.

Ocado shares have had a rollercoaster ride since listing at 180 pence in 2010. Having risen 122 percent over the last year they were down 1.2 percent at 565 pence at 1014 GMT, valuing the business at 3.3 billion pounds.

“The shares are fundamentally fairly valued on the basis of one international deal being signed per year over the next 10,” said RBC analyst Sherri Malek.

Editing by Paul Sandle and Robin Pomeroy

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