It’s not been a great year so far for the Ocado share price, its amongst the top 10 worst performing FTSE100 stocks year to date, down over 17%, although it’s still well up on where it started 2020, pre pandemic.

That suggests that any further progress in terms of share price gains could well be hard won. There is no doubt the company has made great strides in boosting capacity, very much to the detriment of returning a profit, and has also made some great deals, with the most recent deal with Marks and Spencer the most notable, and which passed its first anniversary earlier this month.

At the start of this year Ocado’s share price almost put it within touching distance of Tesco, the UK’s number one food retailer, despite full year revenues that were a mere fraction of Tesco’s £58bn, at £2.3bn.

Whether this comparison prompted a reassessment is a moot point, however like most companies that have done well from the pandemic, the declines are probably down an expectation that an easing of restrictions and reopening of the UK economy would prompt a slowdown in revenues, and that certainly appears to be the case as far as this morning’s Q3 numbers are concerned.

Q3 revenue for the retail unit fell 10.6%, compared to the big pandemic induced jump of 54% we saw in the same quarter last year, although customer orders have continued to rise, with orders per week increasing by 22%, although the average basket size remained steady at £124.

The quarter was also impacted by the fire at the Erith fulfilment centre in mid-August, and which saw revenues fall by 19% in the weeks afterwards due to the loss of capacity, and which it is estimated cost the business around £35m in revenue.

On the plus side increased capacity at Hatfield and Dordon, the reopening of the Andover facility, and the new centre at Purfleet has helped mitigate the problems at Erith, although operating losses due to the fire have been estimated to be around £10m.  

The company is also seeing increased costs as a result of higher wages and which look set to add another £5m to the cost base, which will inevitably hit full year EBITDA.

Revenues for Q3 came in at £517.5m, which when added to the £1.3bn in revenues in H1 still puts Ocado on course to beat last year’s total revenue number of £2.3bn, especially with the addition of Purfleet and Andover, while the return to normal of the Erith centre in November should also help.  

Over the next few quarters Ocado says it expects to continue to see strong revenue growth as it benefits from the increased capacity from Bristol, Andover and Purfleet as well as the new Bicester facility which is due to open shortly. The company has said it intends to add further capacity in a new facility in Luton, so that total capacity can rise to 700k orders per week. 

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