December 13, 2018 / 7:17 AM / a year ago

Ocado upbeat on 2019 prospects after transformative year

LONDON (Reuters) - British online grocer Ocado (OCDO.L) saw sales growth edge higher over the last three months, forecast a strong Christmas and said it was confident about prospects for 2019, sending its shares higher.

FILE PHOTO: A man walks from the main reception of the Ocado CFC (Customer Fulfilment Centre) in Andover, Britain May 1, 2018. REUTERS/Peter Nicholls

The stock has more than doubled over the last year thanks to four major overseas technology partnerships, including its biggest yet with U.S. group Kroger (KR.N). They rose as much as 3.9 percent on Thursday.

“Although in many respects 2018 has been a transformative year for Ocado, the story has only just begun,” said Chief Executive Tim Steiner, adding that the new year would bring

“substantial opportunities”.

Ocado’s retail revenue grew 12 percent to 390.7 million pounds in the 13 weeks to Dec. 2, its fiscal fourth quarter, having risen 11.5 percent in the previous quarter.

Online is Britain’s fastest growing grocery channel. It is expected to grow by 52 percent over the next five years to 17.3 billion pounds, according to industry researcher IGD.

Ocado has forecast retail revenue growth of 10-15 percent for 2017-18.

In contrast industry data published on Tuesday showed sales growth at Britain’s four biggest grocers — Tesco (TSCO.L), Sainsbury’s (SBRY.L), Asda (WMT.N) and Morrisons (MRW.L) — in a range of down 0.2 percent to up 1.5 percent in the latest 12-week period.

Ocado said new capacity at its robotic warehouses — or customer fulfilment centres (CFCs) as it calls them — in Andover, southern England, and Erith, near London, had enabled it to achieve double-digit growth in new customer numbers in the quarter.

Average orders per week rose 13.1 percent to 320,000, though average order size did dip 1.0 percent to 104.9 pounds.

“We’re expecting our best ever Christmas,” Chief Financial Officer Duncan Tatton-Brown told Reuters.

“We expect it’s (2019) going to be busy...Our sales team is looking for the next Ocado Solutions partner,” he said.

The finance chief said Ocado’s relationships with partners were progressing well. Building work was continuing on Casino’s (CASP.PA) first CFC in the south of Paris and had begun on Sobey’s (EMPa.TO) first site in the greater Toronto area.

Tatton-Brown also noted that Kroger announced last month the location of its first CFC site in Cincinnati.

Shares in Ocado were up 31.4 pence at 826.3 pence at 1015 GMT, valuing the business at 5.64 billion pounds.

“While we believe there is scope for further international deals, we think there is a great deal for management to now execute on and thus see a low likelihood of another major deal in the near term,” said RBC Europe analyst Sherri Malek.

Reporting by James Davey; editing by Sarah Young

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