Ocado has witnesseda severe drop in its sales and this has forced the company to cut the 2022 growth forecast by about 10 percent. The primary reason for sales falls is a rise in the prices of its products to fight against soaring inflation. Moreover, people are now returning to offices and the shopping habits of pre-Covid are on the rise. A decline in online shopping is being noticed lately.
The sales of the Ocado and M&S joint venture dropped by 5.7 percent in the Q1 that ended in February compared to the same quarter a year ago. The COVID-19 pandemic and lockdown in 2020 and 2021 increased the demand for online shopping.
Consumers are now spending more time shopping at physical stores and less online due to reduced restrictions of the Covid protocol. The online order size is now shrinking. Moreover, the rising inflation is reducing shopping to a significant amount.
It is currently difficult to predict the impact of inflation on businesses. There has been a rise in the prices of raw materials, utility bills, dry ice and more. All these are making the grocery industry challenging.
The primary reason for rising inflation is the Russian invasion of Ukraine, which has not entered into the fourth week and still uncertainty prevails.
The food prices increased by 4.3 percent in February and are considered as the fastest rise in nearly a decade period. An analyst states lot of companies may issue guidance, rework forecasts and cut profits due to higher interest rates as well as input costs.
It is learned the average time spent on the Ocado website has dropped by 15 percent. However, the number of active customers has increased by about 31 percent.
Ocado CEO Melanie Smith said the previous quarter was encouraging even though challenges were evident.
The decline is simply a comparison of a year ago when the rise in online shopping habits was immense due to the Covid restrictions in the country and people were forced to stay indoors.
Meanwhile, the Ocado shares have lately dropped by about 9 percent.
Ocado was founded in April 2000 by Jonathan Faiman, Tim Steiner and Jason Gissing. It is a grocery technology company owning a fifty percent share. The other fifty percent is owned by Marks & Spencer. It became a public limited company in July 2010 and its stock is listed on LSE.
The British online supermarket mostly sells their own brand. Its websites, apps, robots and automated warehouses are developed in-house under Ocado Technology.