British online supermarket Ocado Group has today raised its annual earnings forecast for the second time in two months, but sales growth at its retail joint venture with Marks & Spencer has slowed due to capacity constraints.
The group has seen sales soar this year as the Covid-19 pandemic has generated huge demand for grocery home delivery.
Revenue at its M&S joint venture rose 34.9% to £579.6m in its fourth quarter to November 29 - a slowdown from third quarter growth of 52%.
"The slower rate of growth compared to Q3 reflects the seasonality of the period," Ocado Retail finance chief Niall McBride said today.
"The bottom line, however, is that we've continued to operate at capacity over the quarter," he added.
Shares in Ocado were down 5% today, paring 2020 gains, which have been mainly driven by the technology side of the group, to 72%.
Ocado forecast earnings before interest, tax, depreciation and amortisation (EBITDA) of "over £70m for 2019-20 compared to a previous forecast of "over £60m". EBITDA in 2018-19 was £43.3m.
Average orders per week rose 3% to 360,000 in the fourth quarter, and average order size was £133.
In September, the Ocado Retail venture switched from using Waitrose to M&S products.
Ocado said sales and earnings growth in 2020-21 would depend on the extent to which it returns to a "normalised" trading week and when planned additional capacity goes live.
It plans to open three new warehouses in 2021, which will ultimately provide 40% more capacity.
Ocado's capital-intensive and centralised fulfilment model has restricted its ability to quickly increase its capacity during the pandemic.
In contrast, Britain's big four grocers - market leader Tesco, Sainsbury's, Asda and Morrisons - were quickly able to adapt their predominantly store-pick models to boost capacity, enabling them to deliver faster growth and win share of the online market.
Online grocery shopping has doubled its share of the UK market to nearly 14% since the start of the pandemic and Ocado reckons it could reach 30% over the next few years.