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Britain's Ocado sees retail sales growth accelerate

Britain's Ocado sees retail sales growth accelerate
FILE PHOTO: Part of the Ocado CFC (Customer Fulfilment Centre) is seen in Andover, Britain May 1, 2018. REUTERS/Peter Nicholls/File Photo -
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Peter Nicholls(Reuters)
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LONDON (Reuters) – British online supermarket and technology company Ocado <OCDO.L> reported an acceleration in retail sales growth in its latest quarter, helped by additional capacity from its fourth automated warehouse.

The third quarter results were the first since Ocado and Marks & Spencer <MKS.L> completed their 1.5 billion pound joint venture deal in August to create Ocado Retail.

For the 13 weeks to Sept. 1, its fiscal third quarter, Ocado Retail’s revenue rose 11.4% to 386.3 million pounds. That compares with Ocado’s first half growth of 9.7% and guidance of 10-15% for the second half.

Average orders per week rose 12.1% to 314,000 as more slots became available, though average order size fell 0.8% to 105.42 pounds, reflecting a slightly higher frequency of purchase.

In February Ocado warned retail sales growth would be dented until it increased capacity elsewhere after a fire devastated its flagship robotic warehouse in Andover, southern England.

That extra capacity was secured through a deal with Morrisons <MRW.L>, Britain’s No. 4 supermarket group, in May, giving Ocado sole use of its fourth, and newest, robotic warehouse in Erith, southeast London.

“These first set of results from the joint venture between Ocado Group and M&S show the resilience of Ocado following the Andover fire and the momentum the business now has,” said Melanie Smith, Ocado Retail’s CEO.

The Ocado Retail joint venture will provide M&S with a home-delivery service by September 2020.

Shares in Ocado, up 48% over the last year, closed Monday at 1,349.5 pence, valuing the business at 9.5 billion pounds.

While Ocado’s retail business holds just a 1.4% share of Britain’s grocery market, its warehouse technology has powered its valuation.

The group has technology deals with eight major retailers, including U.S. group Kroger <KR.N> and France’s Casino <CASP.PA>.

(Reporting by James Davey, Editing by Paul Sandle)

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