Online grocery group delivers sales in harsh winter weather

The loss-making group, whose shares have been on a roller-coaster ride since they floated in July, said the rise in December gross sales followed an increase of 27.4 per cent in the last quarter of its financial year.

Most analysts had expected fourth-quarter and December sales growth to be slightly below the 29.5 per cent reported in the third quarter as the group annualised the introduction of Sunday deliveries and grappled with some harsh weather.

Gross profit margins remained stable and earnings before interest, tax, depreciation and amortisation (EBITDA) were in line with its expectations, the group said.

Ocado, which sells the products of upmarket grocer Waitrose, cut the price of its initial public offering by almost a quarter and then saw its shares almost halve as investors worried when it might convert strong sales growth into profit.

But the stock has since bounced back above its 180 pence flotation price, helped by periodic speculation it might attract a bid from a food retailer yet to offer a full internet service, such as Marks & Spencer or Morrisons. Ocado's shares closed down 2.7 per cent last night, a fall of 5p to 181p.

Ocado expects strong sales growth to continue in 2011, despite a tough economic backdrop, and to take market share from store-based supermarkets.

Finance director Andrew Bracey said: "I think we're going to see fairly flat performances from store-based retailers and quite sparkling performances from online. It was particularly savage this year on the high street but you are seeing an acceleration of customers going online for their groceries."