Ocado raised its sales outlook for the year as it wins back middle-class shoppers from Aldi and Lidl.
The company said it now expected revenues to rise by more than 10 per cent having previously forecast single digit percentage growth.
The upgrade came after revenues at Ocado Retail, its joint venture with Marks & Spencer, hit £658million in the 13 weeks to September, up 15 per cent from the year before.
Delivering: Ocado said it now expects revenues to rise by more than 10% having previously forecast less than 10%
The increase was driven by more people placing orders on its website and customers filling up their shopping baskets.
Hannah Gibson, the boss of Ocado Retail, said efforts to cut grocery prices had helped it attract more shoppers.
She said: ‘We’ve seen switching from Tesco now consistently for 12 months in a row. And we’ve also seen switching from some of the discounters at points as well.’
Average prices fell by 0.4 per cent across Ocado, the company said, against grocery inflation of about 2 per cent.
The average number of weekly orders rose to 437,000 in the third quarter, up from 381,000 last year.
The figures were stronger than analysts had expected, sending shares up 2.8 per cent or 9.7p to 359p.
Ocado boomed during the pandemic when households splashed out on deliveries. Its shares reached an all-time high of 2,777p in January 2021.
But the grocer floundered when customers flocked to cheaper rivals as lockdown restrictions ended and inflation shot up.
The company has also been weighed down by setbacks in the rollout of its robotic warehouses with overseas partners and fierce competition.
New customers: Ocado Retail boss Hannah Gibson said efforts to cut grocery prices helped it attract more shoppers
This has taken its toll on the share price. Ocado’s value has tumbled by more than half in the past year and has fallen by more than 70 per cent since 2019, when its shares reached a pre-pandemic high of 1370p.
In July, Tim Steiner, chief executive of Ocado, urged disgruntled shareholders to keep the faith as the group narrowed its losses for the half year.
The group reported a £154million loss for the six months to the start of June against losses of £290million a year ago.
‘We expect to see a lot of long-term growth,’ he said at the time.
Ocado has been at war with discounters Aldi and Lidl, which continue to steal market share from the UK’s big supermarkets.
John Moore, senior investment manager at RBC Brewin Dolphin, said Ocado was starting to deliver after a ‘bumpy period’ for the company.
He said: ‘Strong revenue, volume, and customer growth suggest the joint venture’s strategy is yielding results.’
But the online retailer is far from out of the woods.
Russ Mould, investment director at AJ Bell, said: ‘There are signs that in order to achieve this improvement in sales the Ocado joint venture is making compromises on price and this means the impressive growth in sales will not necessarily be reflected in better earnings, with margins pretty skinny.’
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