Ocado is popping after beating forecasts

Ronald Martinez/Getty ImagesPOP!

Ocado shares are jumping after the online grocer beat forecasts with its first quarter numbers and said it is making “steady progress.”

The online grocer on Tuesday put out a first-quarter trading update for the 12 weeks to February 21, announcing 15.3% rise in sales and a 16.9% rise in the average number of orders per week. The only blip is a 2.9% fall in average order size, down from £114.72 to £111.41.

Like most grocers, Ocado is caught up in a price war, cutting prices in a bid to defend market share from the likes of discounters Aldi and Lidl.

City consensus has been for a 14% rise in sales, so the figures have come as a positive surprise to investors. Shares are up over 8% after an hour of trade in London.Yahoo Finance

CEO Tim Steiner says in today’s update:

We are pleased with the steady progress in our business, maintaining double-digit sales growth in a retail environment that remains challenging, and post period end we shipped over 250,000 orders in a single week for the first time.

We believe our focus on customer satisfaction and commitment to improving what we offer to consumers through innovation and our proprietary IP will support further growth. Notwithstanding the tough nature of the marketplace, we expect to continue growing ahead of the online grocery market.

Ocado’s share price has been under pressure recently after Amazon signed a deal with Morrisons, throwing a tie-up between Ocado and the supermarket or a takeover from Amazon into doubt.

Steiner makes no mention of any of this or the tie-up with Morrisons. Independent retail analyst Nick Bubb says in an emailed statement this morning: “Ahead of today’s Q1 trading update all the focus has been on the re-negotiation of the Morrisons deal with Ocado and the protracted search for an Overseas licensing deal, but there is, needless to say, no mention of anything like that in today’s statement.

“Fortunately, Ocado is able to report some decent trading, with gross retail sales up 13.8% (orders up 16.9%). The next deadline for Ocado’s management to come up with some deal news is the interim results on June 28.”

Jefferies says in a note out on Tuesday morning: “Ocado’s Q1 sales update is coincidental to the stock’s investment debate, even if it confirms further gradual gains in UK share.

“More materially for the group, we await for details of how the MRW agreement may change, and whether Amazon’s push into UK food could negate the attractions of Ocado’s international licensing prospects.”