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Ocado Chief Says Sales Growth to Approach 20% by End of Year

Jan. 31 (Bloomberg) -- Ocado Group Plc, the U.K.’s largest online grocer, predicted that sales growth will approach 20 percent by the end of the year and reported that its annual loss narrowed.

Revenue will be boosted by improved distribution capacity and expansion in the number of products offered, including Ocado’s own-label goods, Chief Executive Officer Tim Steiner said today in a telephone interview.

Sales growth in the first quarter will be about 10 percent, “broadly in line” with the prior quarter and a slowdown compared to last year’s 16.6 percent growth, the Hatfield, England-based company said today in a statement.

“We expect to see an acceleration in the growth rate through the quarters, so from around 10 percent to somewhere approaching double that level by the last quarter” Steiner said. The company is building warehouse capacity and adding specialty items including Daylesford Organic products.

Ocado rose as much as 6 percent in London trading and was up 5.4 percent at 84.5 pence at 8:30 a.m. That extended the stock’s gain this year to 55 percent.

“Against the backdrop of a weak U.K. economy, we have continued to see the development of the online grocery retail market,” Steiner said in the statement. “We believe this growth is evidence of a structural shift in consumer behavior and we will continue to see an expansion of the online grocery retail market.”

Annual Earnings

Ocado said in December that annual earnings would miss estimates, hurt by capacity constraints at its distribution center and the cost of employing extra staff to boost order fulfillment.

The pretax loss was 2.42 million pounds ($3.8 million) in the year ended Nov. 27, compared with a loss of 12.2 million pounds a year earlier, the retailer said today. The average of 10 analyst estimates compiled by Bloomberg was for a loss of 1.8 million pounds.

Ocado, which listed on the stock exchange in July 2010 and mostly sells items from upmarket grocer Waitrose Ltd., hasn’t reported a pretax profit in its 12-year history.

To contact the reporter on this story: Sarah Shannon in London at sshannon4@bloomberg.net.

To contact the editor responsible for this story: Sara Marley at smarley1@bloomberg.net

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