Ocado Group plc

Good morning and welcome to the Ocado Q4 2024 analyst call. I will now hand over to Chief Executive Officer Hannah Gibson. Please go ahead.

Good morning all. Thank you for joining Ocado Retail's Q4 results today. I'm Hannah Gibson, CEO of Ocado Retail, and I'm joined by Matt Ankers, our CFO. There's been a lot going on at Ocado Retail in 2024, and we've made great progress on delivering on our perfect execution strategy And as a result, we've seen strong growth, which accelerated as the year progressed. Our proposition is resonating with customers. We've seen more people shopping with us more often as we give them even better service at better value. Let me share some of the key highlights from the Q4 period, which includes the 13 weeks to the 1st of December 2024. Our retail revenue grew by 17.5% to £716 million. On Ocado.com, our volumes grew by 17% year-on-year, and average orders per week grew by 16.9% to 476,000. We hit half a million orders per week at the end of Q4. Looking now to the full year FY24 results, which includes the 52 weeks of 1st December 2024, our retail revenue grew by 13.9% to £2,668,000,000. Volumes, total items on Ocado.com grew by 12.9%, and average orders per week grew by 12.5%. driven by growth in active customer base of 12.1% to 1.1 million customers and frequency increased as customers shop with us more often. Average basket value increased by 1% to £122.09 due to growth in basket size, up 0.3% to 44.3 items and a 0.6% increase in ASP, well below the UK grocery inflation as we continue to invest in price. Given our growth rates, as you'd expect, we delivered our biggest ever Christmas as our customers made the most of the season to indulge in our massive range. And customers continued to reach all their M&S favourites too, from the party food and showstoppers through to the core range, which continued to sell really strongly. And Cantar figures showed Ocado Retail was the fastest growing retailer in the sector for the nine months of 2024. Throughout the year, we've continued to raise the bar on our proposition. Firstly, we've continued to focus on unbeatable choice. including now having our widest ever range of M&S products live on site, and we've done lots of joint launches of their fantastic new ranges too. We've grown our range of small suppliers, often being the first to list new products supported by the launch of Ocado Routes, our new community programme for challenger brands to enable us to be the first for new trends. Secondly, on the unrivalled service, we focus on keeping our promises to customers by delivering orders on time and in full. We improved our already high perfect orders rate by 7 percentage points and continue to ensure 99% of items were delivered exactly as promised. We also added half a day's life to the freshness of our produce. And then thirdly, reassuringly good value. We've made further strides through our carded price promise, a series of big price drops across hundreds of products and increasing our own brand range even more. As a result, we've shifted our value perceptions as customers realise how much we've moved on price with value satisfaction increasing 4.3 percentage points versus the start of the year. Taken all together, these three elements of our proposition have led to our NPS score increasing plus 4.9 percentage points versus last year, and we continue to see we have the highest NPS in the industry. Turning to our operations, our CFC efficiency approved throughout the year, with average units per hour, UPH, rising to 220, up 15% versus last year, with our newest CFC in Leighton reaching 269 UPH, in the year as we further rolled out on-grid robotic PIC. And over the Christmas period, our network exceeded design capacity, demonstrating the further growth potential of our CFCs. This year has seen us make significant progress. And in addition to the revenue growth, EBITDA has also progressed strongly year on year. We're now moving into the next phase of our strategy, and we're evolving it to focus on the following. Firstly, we're clearly going to be continued focus on delivering a leading customer proposition. and we'll continue to be relentlessly focused on unbeatable choice, unrivalled service and reassuring good value. Secondly, we want to deliver smart growth as part of our drive to improve profitability. This includes increasing our customer lifetime value, improving our cost to serve and maximising our network capacity. And then thirdly, to do this, we need to build out our platform for the future to be ready and set up for the next few years of what will be an exciting period for online grocery. Looking to FY25 then, we have confidence that business will continue to grow sales volumes well ahead of the market as we continue to acquire new customers to Ocado. We expect frequency to be stable as we retain the improvements delivered in FY24. And we expect to make further progress on driving operational efficiency and scale leverage, continuing our journey towards the mid-high single-adjusted EBITDA margin in the midterm. And this will be reflected in our EBITDA guidance for FY25 for Ocado retail at the Ocado Group full-year results at the end of February. Whilst we've made lots of progress, there remains a lot of potential ahead. And as ever, I'd just like to end by a big thank you to all the teams at Cardio Retail, Cardio Group, M&S, and our fantastic suppliers as well. Many thanks, and let's go to questions.

Thank you. Ladies and gentlemen, if you would like to ask a question on today's call, please signal by pressing star 1 on your telephone keypad. Again, that is star 1 for your question today. And up first, we have Manjari Dar from RBC. Please go ahead.