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Labour shortages dent Ocado Retail's sales

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By Reuters
Ocado Retail quarterly sales fall 3.9% on labour shortages
Ocado Retail quarterly sales fall 3.9% on labour shortages   -   Copyright  Thomson Reuters 2021

By James Davey

LONDON -British online supermarket Ocado Retail, a 50:50 joint venture between Ocado Group and Marks & Spencer, on Tuesday reported a 3.9% fall in revenue in its latest quarter, with its performance held back by labour shortages.

Shares in Ocado were up 9.6% at 1022 GMT however as the sales fall was outweighed by news overnight that Ocado had won a patent infringement lawsuit filed by Norwegian rival AutoStore Holdings Ltd at the International Trade Commission (ITC).

Shares in M&S were down 1.1%.

British retailers are grappling with delays in international supply chains that are being compounded by labour shortages in domestic transport and warehousing networks, with a shortage of drivers particularly acute.

Ocado Retail said revenue was 547.8 million pounds ($723.7 million) in its fourth quarter to Nov. 28, down from 570.1 million pounds in the same quarter last year.

Revenue growth was impacted by a high degree of staff vacancies at the beginning of the period. The JV had around 1,200 roles to fill, equivalent to about 10% of its target level of staff.

“We have halved this number to around 650 vacancies thanks to temporary sign-on incentives and increased hourly rates in certain locations,” finance chief Niall McBride told reporters.

“We’re getting closer to normal levels, there’s still more to do.”

The JV’s average customer orders per week increased 8.5% to 375,100 versus the prior year, driven by a 22% increase in active customers to 832,000.

However, average basket value fell 12% to 118 pounds as many consumers returned to the office and spent less time at home.

The venture said the participation of M&S products in orders continued to be strong, at nearly 30% of the basket.

It also highlighted cost inflation due to nationwide utility price increases and dry ice shortages.

Ocado’s revenue had fallen 10.6% in its third quarter, hurt by a July fire at its warehouse in Erith, southeast London, which disrupted operations.

The JV said the 2020-21 outturn was expected to be in line with guidance.

It forecast a return to revenue growth in 2022 at the top of the historic pre-COVID-19 range of 10-15%, and plans investments of around 50 million pounds in 2022 to support growth.

Following a year of investment in 2021-22, the JV is targeting a rebuild in margin towards 2020-21 levels.

McBride said the emergence of the new coronavirus variant Omicron had not had a significant impact on consumer behaviour, though traffic to the website had increased.

($1 = 0.7569 pounds)