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Ocado Sales Grow By 10%, Predicts Bumper Final Quarter

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LONDON -- Ocado (LSE: OCDO.L  ) has become a bit of a poster child for overexuberant flotations. So it seems to be keeping a much lower profile these days, and getting on with steadily improving its business.

Its sales for the latest quarter saw a 10% increase to 163 million pounds, taking total sales growth for the last three quarters to just over 11%.

An increase in orders for 110,945 per week to 120,494 was responsible for most of the sales rise, while the average order size grew from 111.08 pounds to 112.44 pounds.

On the profit margin front, Ocado said they had been "preserved," as it "placed less emphasis on short-term vouchering activity which is currently prevalent in the market."

Ocado said the Jubilee and Olympic events had influenced ordering patterns, but didn't give further details, although it did say it was pleased that ordering patterns had now returned to normal.

Its second depot -- its first one is in Hatfield -- remains on track to open in the first quarter of next year. Meanwhile, Ocado has been increasing the range of products it offers by 30%, and introducing promotions such as "Low Price Promise," which built on its Tesco Price Match offer.

Looking forward, Ocado stills sees a combination of a tough consumer environment and heavy promotional activity. However, it still expects an increase in the rate of sales growth in the final quarter of its financial year.

Ocado shares slipped 5% to 64 pence after the release of this statement, valuing the company at around 330 million pounds. It has net debt of 83 million pounds, but brokers are expecting the company to break even when it posts its full-year results early next year.

Although Ocado has disappointed since its flotation at 180 pence back in the summer of 2010, one expert investor does have a record of avoiding such losers. Indeed, ace stock-picker Neil Woodford has delivered an impressive 347% total return -- and thrashed the wider market -- during the 15 years ended Dec. 31, 2011.

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Stuart Watson does not own shares of the companies mentioned. The Motley Fool has a disclosure policy.
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