Ocado’s profits knocked down by investment costs

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Ocado
// Ocado profits dented by investment costs
// The online retailer reported a pre-tax loss of £44.4m in the year to December 2
// Sales rose 12.3% to £1.59bn

Ocado has seen full-year losses widen after its profits were dented by investment costs and hit by an accounting change.

The online grocery retailer reported a pre-tax loss of £44.4 million in the year to December 2, compared to a loss of £8.3 million the previous year.

However, sales rose 12.3 per cent to £1.59 billion.

Earnings fell 20.7 per cent to £59.5 million as it counted the cost of investing in partnership deals with overseas grocers like Kroger, Casino and Sobeys and developing new warehouses and IT systems.

Active customer numbers grew by 11.8 per cent in the year to 721,000 and total order volumes increased 12.1 per cent to an average of 296,000 orders per week.

Meanwhile, average basket values were slightly lower at £106.85 versus £107.28, driven by an increase in prices.

“We now have in place a platform for significant and sustainable long-term value creation as the leading pure-play digital grocer in the UK, a world-leading provider of end-to-end ecommerce grocery solutions, and as an innovative and creative technology company applying our proprietary knowledge to a range of challenges,” Ocado chief executive Tim Steiner said.

“Our transformation journey is well under way with increased cash fees earned and greater investment as we execute on behalf of our partners.”

Ocado said it was hopeful in achieving revenue growth in retail of between 10 per cent and 15 per cent this year.

However, the grocer expects a decline in earnings as costs linked to its customer fulfilment centres continue to rise.

Meanwhile, total capital expenditure for the group is expected to be £350 million.

The results come amid speculation that Ocado was in talks with Marks & Spencer to sign off a food delivery deal.

Ocado is currently in a food delivery deal with Waitrose, but M&S could potentially step in when the existing contract ends next year.

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