Shares inOcado(LSE: OCDO) increased by 4% to 325p in early trade making the online grocer the biggest FTSE 250 riser. Sales rose by 15.5% to 218.5m in the three months to 10 August, but price competition had a negative impact on average order size, which fell 1.7% to 112.
The grocery sector has seen an increased level of promotional activity with Tesco and Morrisons cutting prices as discount rivals Aldi and Lidl gain market share. Ocado added that intends to grow sales broadly inline with, or slightly ahead, of the online grocery market.
Ocados tie up with Morrisons continues to scale successfully with demand, which could lead to similar partnerships with other retailers in the future. The company will start building a third distribution centre this year as it looks to beginproviding logistics for overseas retailers.
Ocado is trading on a price-to-earnings ratio of 70 for the year ended 2015. Overpaying for a company is a risky, and the decision to buy depending on if you believe the company can live up to these expectations is solely down to to you.
But if you already own Ocado shares, remember that asingle mistake needn’truin youroverall returns. Why? Because we should all endeavour to own a portfolio of high-quality companies in a diverse range of industries.
Mark Stones has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.