UK online grocer Ocado confident about 2015 prospects

Reuters News
Posted: Jan 14, 2015 6:14 AM

LONDON (Reuters) - British online grocer Ocado outperformed its traditional supermarket rivals over Christmas and said it was confident about prospects in 2015 despite an escalating price war.

The firm, whose range includes products supplied by upmarket grocer Waitrose [JLP.UL], said on Wednesday sales growth in December continued at the rate it achieved in the final quarter of its 2013-14 financial year.

Gross retail sales in December rose 14.8 percent year-on-year compared with a rise of 14.9 percent in the previous quarter.

"We look forward to 2015 with some confidence and expect to continue growing sales slightly ahead of the online grocery market," Chief Financial Officer Duncan Tatton-Brown told reporters.

Troubled market leader Tesco said last week its grocery home shopping sales increased 12.9 percent over the six weeks to Jan. 3, while Sainsbury's were up 6 percent in its latest quarter.

Morrisons, a late entrant online through a supply deal with Ocado, said on Tuesday online contributed 1.0 percent to its like-for-like sale performance in its Christmas trading period.

All of Britain's so called "big four" grocers, which includes Wal-Mart's Asda, have cut prices in an attempt to stem a loss of market share to discounters Aldi [ALDIEI.UL] and Lidl [LIDUK.UL} and are expected to cut more this year.

Ocado operates price matching schemes comparing prices against Tesco and baskets of items.

"We're not concerned if there's a little bit more price activity in the market," said Tatton-Brown, noting Ocado's product range of over 40,000 items offers some protection.

"In a price competitive environment a bit of challenge on pricing is much easier to cope with if you are seeing mid-teens sales growth and you're seeing improving cost ratios."

Shares in Ocado, down 24 percent over the last year, were down 1.7 percent at 403.4 pence at 5:20 a.m. EST, valuing the business at 2.35 billion pounds.

"If it retains a pledge to price match Tesco UK then its gross margins may be in for a bit of a hard time," said Shore Capital analyst Clive Black.

Ocado has not made an annual pretax profit since it was founded in 2000 but analysts are forecasting one of about 10 million pounds ($15 million) for its 2013-14 which ended Nov. 30, along with underlying core earnings of 71 million pounds.

(Reporting by James Davey; editing by Susan Thomas)