Ocado, the food equivalent of Amazon, is fast becoming the darling of the London stock market. Shares are up 135% since it floated in July 2010.
We recently reported that the CEO of Ocado has met Amazon CEO Jeff Bezos, and we suggested the two companies would be a good fit together. But Ocado chief financial officer Duncan Tatton-Brown told Business Insider that the online delivery supermarket is aiming to expand internationally is not “looking” to be snapped up by a competitor.
“We’re doing well in a difficult market. We would do even better in a benign market,” said Tatton-Brown in telephone interview with Business Insider. “The latest figures show that it takes the strength of a particular offering like ours to grow. Customers are moving more online [for grocery shopping] from the convenience and comfort of their own sofa. Customers are increasingly coming to us even though the market is difficult.”
“While not much changed since we reported our results last month [in terms of companies courting it for a takeover or in developing market trends], I will say this very clearly, we’re not looking to encourage or aspire to an acquisition. There is a huge opportunity and value for Ocado to grow and to grow well.”
Today, Ocado revealed that in 12 weeks to February 22, 2015, group gross sales soared 19% year on year. In its first quarter trading statement, it also said average orders per week also rose by 18.1%.
Last month it reported that revenues
grew nearly 20% to nearly £1 billion ($US1.5 billion) in 2014. As a milestone in its growth trajectory in the highly competitive British grocery market, which is dominated by the likes of Tesco and Asda, it also recorded a pre-tax profit of £7.2 million.
Ocado is one of the most exciting tech companies in Britain. It was founded in 2000 and took a decade to get to the stock market. As we’ve described it before, it’s basically Amazon but for food. It also has its own warehouses, trucks and drivers.
In fact, Ocado prides itself on being cut from a different cloth than its competitors: it prefers to recruit staff who have a background in customer service or customer relations, rather than professional drivers, and then teach them to drive the vans.
The share price is up around 135% since it floated but it is still down over 30% since March last year.
“Britain’s grocery retail market is difficult. You just have to look at our competitors trading information to see that,” said Tatton-Brown to Business Insider. “A number of players are increasingly focusing on online sales and the discount sector is challenging. It’s good news for the customer but not for the retailer. Amid all this, wage bills are going up and the industry is being squeezed.”
“But the dynamics are changing. Our business is growing and as a new player we’re doing well in a difficult market.”
According to market researcher Kantar Worldpanel’s data out today, Britain’s biggest supermarket Tesco posted its strongest sales performance in 18 months, with a 1.1% rise in sales over the 12 weeks to 1 March 2015. It also claims 28.7% of Britain’s market share.
But, Ocado has a plan.
“We are looking at expanding internationally eventually,” said Tatton-Brown. “We are targeting to sign our first partnership deal and are looking at markets to expand in. [When we do expand internationally] we are looking at bigger, more developed Western markets.”
Ocado has a long way to go to rival the likes of Tesco and Asda but if it keeps up this momentum and expands internationally, it take the world by storm.
And the analysts think so too.
“Increasingly, it feels like Ocado is starting to walk the walk,” said Phil Dorrell, director of the retail consultants, Retail Remedy in an emailed statement. “Ocado is proving not just a successful online grocer but a powerful IT and Operations developer for other retailers. We certainly wouldn’t rule out other large scale collaborations in the future.”
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