Investing.com -- Shares of Ocado Group (LON:OCDO) surged by over 10% on Tuesday following its strong performance during the Christmas period.
The online grocery retailer, a joint venture between Ocado Group and Marks & Spencer (OTC:MAKSY), reported its highest-ever levels of trading during the festive season, supported by a robust customer base and operational improvements.
In its fourth-quarter update, Ocado Retail reported that revenue grew by 17.5% year-on-year, reaching £715.8 million, driven by a 12.1% increase in its active customer base, which now stands at over 1.1 million.
The average weekly orders increased from 407,000 to 476,000 during the period. A major part of Ocado's growth has been attributed to its competitive pricing, providing a broad product selection, and seamless customer support.
Average basket values remained steady at about £121, underscoring stable consumer demand despite broader economic pressures.
The company credited the record-breaking Christmas results to its expanded seasonal range, which included a wide selection of Marks & Spencer festive offerings, alongside premium products from other suppliers.
The combination of convenience, variety, and value resonated with customers during the critical holiday shopping period.
“We offered an extensive seasonal range across M&S and many other suppliers, with customer favourites including the M&S party food selection from hot honey halloumi to pigs in blankets to the showstopper entertaining range; cheeses from a wide range of suppliers including Paxton and Whitfield; and a continuing popularity of low and no alcohol drinks for the festive season,” said Ocado in a statement.
The company’s advanced customer fulfillment centers reported higher productivity, with some sites exceeding design capacity during peak demand.
Ocado flagged its newest CFC in Luton as a standout performer, reaching a record 269 units processed per hour. Additionally, delivery reliability improved, with on-time and in-full deliveries exceeding 99%.
"2024 was a year of strong growth. In the fourth quarter, we accelerated sales again - reaching 500,000 orders per week for the first time, at the end of November.” said Hannah Gibson, chief executive at Ocado Retail in a statement.
The strong end-of-year performance adds to Ocado’s full-year growth, with revenue rising 13.9% to £2.69 billion in 2024.
Ocado expects to continue growing, with plans to further enhance customer service and operational efficiency.
As per analysts at RBC Capital Markets, Ocado Group's cash flow potential suggests that management's mid-term targets may be "ambitious." While management anticipates an acceleration in order growth, aiming for an average of 50 modules per year compared to the historical average of 27 over the past two years, RBC projects a steadier pace more in line with historical trends.
This more tempered growth outlook suggests profitability could face pressure, as capacity is expected to outstrip demand in the near term.