Ocado Says Venture With M&S Improving After Cutting Costs

Ocado Group Plc said its online retail joint venture is making some progress, with volumes showing a slight recovery as shoppers hunt around for affordable food.

(Bloomberg) — Ocado Group Plc said its online retail joint venture is making some progress, with volumes showing a slight recovery as shoppers hunt around for affordable food.

The joint venture between Ocado and Marks & Spencer Group Plc said it recorded return to positive volume growth in the last month of the third quarter. Average orders per week and the number of active customers also grew with revenue rising 7% from a year earlier, the company said Tuesday.

Ocado’s shares gained nearly 5% in early trading in London.

The British company sees its future as a maker of automated warehouses for supermarkets around the world, but most of its revenue currently comes from the online grocery business it shares with M&S. Ocado Retail has been struggling to boost market share as shoppers returned to stores after the pandemic and shifted away to discount grocers Aldi and Lidl to save money.

Turning the UK venture around is important as it’s a demonstration of what Ocado’s warehouse technology can do.

Ocado Retail has been cutting prices on many basic grocery items to try to remain competitive and keeping a lid on costs. It reiterated guidance that it should return to marginal profit this year, helped by efficiency measures and cost-cutting.

The grocer has started a price match with Tesco Plc in which customers can receive money off their next online shopping order if the previous one would have been cheaper at Tesco. Earlier this month, Ocado cut prices on more than 300 essential items including bagels, chicken breasts and stain remover.

Ocado has been boosting efficiency at the joint venture. The company is closing its oldest customer-fulfillment center in Hatfield, England and has opened a facility in nearby Luton, which it said has double the productivity.

Ocado and M&S are in talks over a deferred payment still owed by M&S since setting up the joint venture. The amount owing depends on how well Ocado Retail does, and talks have centered on how much of a discount may be warranted due to the previous weaker performance.

(Updates with share move in third paragraph, context from 7th paragraph.)

More stories like this are available on bloomberg.com