UPDATED: '˜Beast from the East' causes headaches for Ocado

Online grocer Ocado has said its sales were hit by the recent disruption caused by heavy snow and winter storms as it battled to deliver orders in the 'most trying conditions'.

Heavy snow caused chaos earlier this month Photo: Johnston Press
Heavy snow caused chaos earlier this month Photo: Johnston Press

The group reported an 11.7 per cent rise in retail revenues to £363.4 million for the first quarter to March 4, with the adverse weather in the final week wiping nearly 1 per cent off its sales.

It comes after sales growth was also held back in the previous three months, when a shortage of drivers saw a slowdown to 11.6 per cent from 13.1 per cent in the third quarter.

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Ocado also saw its average order size slip by 0.4 per cent or 40p to £110.45 in the most recent quarter - which included the busy Christmas period - as inflation was offset by customers buying fewer items in each shop. Average orders per week rose by 11.1 per cent to 280,000, the group added.

Chief executive Tim Steiner said: “We operated at maximum capacity for most of the quarter and were impacted by the winter storms that caused widespread disruption during the final week.

“I would like to take this opportunity to thank all my colleagues who nonetheless succeeded in delivering nearly 300,000 orders over the last week of the quarter, often in the most trying conditions.”

The group also said it was “confident” of sealing more international tie-ups after recently signing a major international partnership and its first foray into North America after reaching a deal with Canadian retailer Sobeys. It is also working with French supermarket giant Groupe Casino.

Ocado said it was on track to open its fourth and biggest distribution centre in Erith, Kent, in the middle of the year, which will be able to handle an extra 200,000 orders a week. Shares in Ocado fell more than 1 per cent after its trading update.

George Salmon, an equity analyst at Hargreaves Lansdown said: “The Beast from the East has done its best to freeze progress this quarter, with disruption from the cold snap seeing the group lose close to £4m in sales.

“However, there’s no getting away from the fact recent months have been transformational for the online supermarket.

“Underlying progress has been good, but it’s the signing of two agreements to licence out its technology to international retailers that has really moved the dial.

“Getting these partnerships over the line has ensured Ocado outperformed every other share in the FTSE 250 over the last 6 months, with the entire FTSE 100 also trailing in its wake.

“Looking forward, we’ll need to see more progress, and, in all likelihood, more deals.

“To maximise its chances of getting more partners to sign on the dotted line, Ocado will need to show it can get the huge distribution centre at Erith up and running smoothly, while effectively deploying the £143m raised in the recent share placing will also be a priority.”

The heavy snowfalls and strong winds caused by the “Beast from the East” brought chaos to many parts of Britain earlier this month. Two police forces declared “major incidents” as the Army was drafted in to help rescue those left trapped in their cars.

Hampshire Police called in the military to help evacuate people from the A31, while Avon and Somerset Constabulary said about 100 vehicles had become stuck on the A303 at Ilminster.

In Greater Manchester, hundreds of drivers spent a night stuck on the M62, with wind speeds reaching 90mph over the Rakewood Viaduct, between junctions 21 and 22.

Ocado delivers food for supermarkets Waitrose and Morrisons as well as own-brand goods.

Ocado was established in the UK more than 16 years ago and listed on the London Stock Exchange in July 2010. It has grown to become the world’s largest dedicated online grocery retailer with more than 580,000 customers shopping with it today.

In 2013, Ocado revealed it had entered into a 25 year agreement with Morrisons to provide operating and technology services to enable Morrisons to launch and operate Morrisons.com, its online grocery business.