Ocado Group PLC (LON:OCDO) (LSE:OCDO.L) has released results for the year to 27 November 2016 to the stock market. Gross sales have increased 13.6% to £1,267.4 million, with revenue 14.8% higher at £1,271 million, which should give investors encouragement.
EBITDA is 3.3% higher at £84.3 million, while profit after tax is 1.7% higher at £12 million. This works out as a net margin of just under 1%. Ocado’s investment grew its active customer base by 14%, with growth in average orders per week approaching 18%.
The company commenced operations at the new Customer Fulfilment Centre in Andover, which is the first instalment of the investment in its new proprietary technology. Ocado’s service levels have remained high at 94.9%, with further investment in its range to increase it to 50,000 SKUs.
Ocado own-label sales increased 10%, with over six products per average customer basket. It experienced continued year-on-year growth of over 40% in general merchandise revenues, while it was voted Best Online Supermarket for the second consecutive year.
Shares in Ocado are up 7% today, but are down 1.5% in the last six months. That’s a worse performance than supermarket stocks Tesco PLC (LON:TSCO) (LSE:TSCO.L), J Sainsbury plc (LON:SBRY) (LSE:SBRY.L), WM Morrison Supermarkets PLC (LON:MRW) (LSE:MRW.L), but is ahead of shares in food producer and retailer Associated British Foods plc (LON:ABF) (LSE:ABF.L). Tesco’s shares are up 26%, Morrisons shares are 28% higher, Sainsbury’s stock has gained 14% and ABF’s shares are down 22% in the last six months.
In my view, Ocado’s shares could continue to rise due to the opportunity for growth within the online grocery space. I think more people will shop online for groceries, which could lead to growth within the sector. However, I feel other companies within the food retail sector may offer better investment appeal due to their higher profitability and more diverse operations. Therefore, while I can understand the potential for Ocado’s stock, I’d rather invest elsewhere.