Ocado (LON: OCDO) will post a fourth-quarter trading update on Tuesday, January 17th…

Ahead of that update, we looked at recent demand trends and consumer chatter to help provide insight into its recent performance. 

OCDO shares, despite a more than 49% decline in the last 12 months, have rallied more than 23% in the first few weeks of 2023.

Ocado Web Traffic Continues to Slide

According to Semrush, traffic to the Ocado website has stabilised following a strong decline since mid-2021, but it has yet to provide any upside impetus, despite a slight rise in December.

However, according to Morgan Stanley’s note last week, Kantar data suggests the online grocer had a “strong” showing in December. 

🛒 Top supermarket businesses in the UK by market share, 12 weeks ending 25 Dec 2022

1⃣ Tesco (27.5%)
2⃣ Sainsbury's (15.5%)
3⃣ Asda (14.0%)
4⃣ Morrisons (9.1%)
4⃣ Aldi (9.1%)
6⃣ Lidl (7.2%)
7⃣ Co-op (5.6%)
8⃣ Waitrose (4.7%)
9⃣ Iceland (2.5%)
🔟 Ocado (1.7%)

Source: Kantar.

— Robert Kimbell (@Rob_Kimbell) January 15, 2023

They reportedly said that Kantar data shows sales at Ocado increased by 8.2% during the 12 weeks to December 25. In addition, they believe sales at Ocado Retail — the Ocado and Marks and Spencer Group joint venture — rose by 20% year-on-year.

While we believe December was an improvement, we aren’t sure that it was too strong. 

Ocado Consumer Sentiment Negative…Just

Our sentiment tracking (updated once per month) shows that Ocado consumer sentiment is leaning to the negative side…

However, while it was not by much, most of the negative sentiment was aimed at the company’s delivery drivers. 

Google Searches Mixed

While UK Google Trends data shows Ocado searches began to edge higher between November and December, it took a nosedive from December 11.

That was probably an indication that the Christmas shopping, for most people, was done.

However, it has yet to recover to its previous levels, and given the current macroeconomic headwinds, it could struggle in the near term. 

Bottom Line:

While the signs lean positive for Ocado demand data over the Christmas period, we are unsure about the medium-term outlook…

With inflation still near its highs and Ocado one of the most expensive supermarkets, demand will be pressured, especially in the near term. 

The company recently acknowledged the demand slowdown when it paused the development of more automated distribution centres in the UK. Beyond the Christmas period (which looks fairly positive), we see it continuing to wane.