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It has been a good time to be one of the major supermarket chains and an even better one for those with an efficient online ordering and delivery system.
A record-breaking 5.9 million people now shop for groceries online and have been prompted to do so in large part by the pandemic. So, it is no exaggeration to say that 2020-21 will probably turn out to be one of the best years in Ocado’s history, to date.
While the big Christmas spend is usually the bumper time for the supermarkets, the party has continued into the new year. With England and much of the UK under a third national lockdown, Brits left working from their kitchen table, shut out of the nation’s pubs and restaurants and large numbers home-schooling have had few other places to turn to for what they need to get them through, except for the supermarket.
In January alone, shoppers spent £1 billion more on supermarket food and drink items compared to the same four-week period last year.
The latest figures from Kantar show that higher than normal sales of alcohol and kid-friendly snacks have helped boost supermarket sales in January, with take-home grocery sales up 12.2% to £29.25 billion during the 12 weeks to 24 January. That means the traditionally ‘dry’ period after the annual festivities was anything but this year; instead supermarkets saw an acceleration of the growth in sales enjoyed over the Christmas period.
That will come as very good news for investors, and especially those in Ocado Group (OCDO) which, now in a joint venture with Marks & Spencer Group (MKS) was again the best performing of the listed grocery businesses, with 12-week sales up 36.6% to £397 million.
Although there are signs that some adults trod the dry January path, lifting sales of low and non-alcoholic beer by 12%, many more seemed to be treating themselves to a drink during the country’s third lockdown, helping alcohol sales grow by £234 million or 29% year-on-year.
With most children back on home-schooling once again during the current lockdown, Kantar also said the average family spent £50 more on groceries in the month of January than during the same period last year. Quick and easy lunchtime staples like fresh pasta, chocolate spread and peanut butter all saw demand increase among family groups by 22%, 42% and 39% respectively.
There is no doubt that Ocado and co are reaping the rewards of having a captive audience. The online grocery delivery firm has upgraded full year earnings expectations having reported strong demand from its Ocado Retail joint venture with Marks & Spencer. As a result of the strong performance, the firm now expects full year earnings to top £60 million, against previous guidance of over £40 million.
This will be reassuring news for investors after something of a change at the firm which only started to offer M&S products on 1 September 2020, having previously stocked and delivered Waitrose items for 18 years.
What happens when the vaccine rollout is complete, pubs and restaurants reopen and life returns to some semblance of normality as hoped for over the summer, remains to be seen. But almost one year on from the start of the pandemic in the UK, Kantar has identified some clear patterns in shopping habits.
It has seen shoppers under the age of 28, who tend to visit physical shops more regularly, increase their spending in larger physical stores by 12%. Over-45s though have cut back on their bigger supermarket spend by around 1%, while the rapid growth of online shopping is being led by the older demographic.
Ocado at the helm of the most successful online grocery business is clearly not resting on its laurels. It is gearing up for ongoing and even increased demand in the future, as its two latest acquisitions show, having agreed a deal to buy advanced piece-picking robotics company Kindred Systems for $262 million, and robotic-arm designer and manufacturer Haddington Dynamics for $25 million.
Ocado chief executive Tim Steiner said: “We consider the opportunities for robotic manipulation solutions to be significant, both for Ocado Smart Platform clients and across the fast-growing online retail and logistics sectors.
“Given the market opportunity we want to accelerate the development of our systems, including improving their speed, accuracy, product range and economics.”
Investors will, no doubt, be hoping for more insight into Ocado’s future strategy when the group posts its full-year results on Tuesday.
More on Ocado
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