Ocado sales grow steadily but margins remain under pressure amid challenging market

Online grocery retailer Ocado posted an increase in sales in the quarter to August, though it warned margins remained under pressure due to a very competitive environment.

In the 12 weeks to 7 August, the FTSE 250-listed group recorded 13.6% year-on-year increase in total sales to £286.4m, while average orders per week increased 18.9% from the corresponding period last year to 226,000.

Including the sales deriving from the deal with supermarket chain Morrisons, total sales were 15.4% higher year-on-year to £314m. Under the terms of the deal, Ocado provides technology and distribution services that allowed the FTSE 100-listed supermarket to launch its online food business, Morrisons.com.

The average order size, however, shrank slightly from the corresponding quarter in 2015, falling 3.4% to £107.94.

Group chief executive Tim Steiner was pleased with the company's steady growth, though he warned the trading environment remained very competitive.

"As the market remains very competitive, we are seeing sustained and continuing margin pressure and there is nothing to suggest that this will change in the short term," he explained.

"However Ocado's combination of choice, competitive pricing, and industry-leading service has contributed to an increase in average orders by nearly 19%, our best volume performance in more than five years."

Steiner added he was confident the group would continue to grow ahead of the online grocery market and "substantially ahead" of the market overall due to a series of technological innovations.