Ocado fixes distribution problems

Hatfield, UK: Ocado, the online grocer Ocado said it has fixed the problems at its Hatfield distribution centre, which is now operating at “record levels of capacity”.

Ocado reported gross sales up 10.9% to £162.1m in the 12 weeks to 19 February, in line with previous guidance of 10% growth and compared with 10.8% in the fourth quarter.

Average orders per week increased by 13.4% to 116,987 in the first quarter, although the average order size dropped to £115.49 from £118.06.

The chief executive, Tim Steiner, said he expected sales growth to pick up further in coming months.  “Evidence suggests we have largely overcome the operational challenges we faced in expanding our Hatfield capacity in the second half of 2011, and are set to meet growing demand through the rest of the year,” he said.

The highest number of orders delivered in a week reached 134,000 at the Hatfield warehouse in Hertfordshire and the company said there were further improvements to come.

A planned second warehouse is set to open in the Midlands in a year’s time at a cost of £215m.  This should ease some of its capacity difficulties the company says.

Ocado was founded in 2000 and mainly sells products supplied by Waitrose, with which it also competes.  Ocado has suffered distribution problems that limited sales.  Analyst Philip Dorgan at Panmure Gordon, which has a “sell” rating on the shares, said: “As expected, there are no surprises with first-quarter sales.  Moving forward, we expect that the competitive environment will get tougher and that Ocado will struggle to demonstrate operational leverage.”

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