Online grocer Ocado has warned that EBITDA for its full-year period is now likely to range between just £27.5 million and £28.5 million, it was confirmed in a trading update published today.
This time last year the retailer was hoping for profits in the region of £44 million but subdued trading and distribution difficulties have led to successive downgrades.
Gross sales for the 12 months ending November 27th 2011 totalled £643 million, 16.7 per cent up on the previous year, but fourth quarter trading growth is estimated by analyst group Shore Capital to be just 11 per cent compared to a rise of 25 per cent seen during the same period last year.
Profit margins were impacted by production issues at its customer fulfilment centre (CFC) in Hatfield which forced Ocado to hire extra staff to maintain customer service levels but the firm says that over the year 98.3 per cent of items were delivered as ordered and 92.3 per cent of orders were on-time.
Tim Steiner, CEO of Ocado, said: “We are encouraged by the operational capacity improvements that we have made, but are disappointed that we did not achieve as large or as early an increase as we had originally planned.
“There is more work to be done and we are focused on delivering capacity and sales growth in the first half of 2012.”
Work continues for the e-tailer on its second distribution centre in Warwickshire, on-time and on-budget, and capital expenditure for the full-year is now expected to be below expectations at between £125 million and £130 million.
Clive Black and Darren Shirley of Shore Capital argue that Ocado should now turn to ‘Plan B’ however, focusing on sorting out the problems at Hatfield before spending any more money on its second distribution site.
The analysts stated: “We worry about Ocado’s current performance and development plans. Indeed, until Hatfield is a demonstrably high-performance unit from a financial perspective, we believe Ocado should abandon its CFC2 plans for Warwickshire.
“Indeed, any CFC2 should be south of the Thames if Ocado’s own analysis of the potential for premium online grocery retailing is right. Not to do so with further profit slippage and cash burn may indeed require another rescue down the line.”