Ocado chief says online shift that’s still to go on is enormous
“It is increasingly clear that the landscape for grocery worldwide has changed for good.”
Ocado’s chief executive said the pandemic had changed the grocery market “for good” after the latest round of UK lockdown restrictions led to another surge in sales, although the company cautioned that investments would weigh on its bottom line.
The online delivery specialist said it was planning to open more automated warehouses to meet elevated customer demand as it reported a 21 per cent year-on-year jump in first-half revenues to £1.32bn.
A new facility in Purfleet, Essex, and a rebuilt centre in Andover, Hampshire, are planned for the second half and would help Ocado process an additional 145,000 orders a week, the company said on Tuesday.
Executives hope the warehouses, which follow a centre recently opened in Bristol, will help Ocado overcome constrained capacity that left it unable to meet demand at the peak of the pandemic.
Tim Steiner, chief executive and co-founder, said the company was in “customer acquisition mode, having been in a very peculiar place a year ago, when we were trying to protect the capacity that we had”.
“We’re going to have capacity to start adding lots more slots than we have now,” he said. “We’ll keep adding more capacity on.”
CEO Tim Steiner: "What is so unique about the Ocado Smart Platform is how it spans everything from in-store fulfilment through dark stores, manual warehouses, semi-automated warehouses, and automated warehouses. We’ve got the whole breadth." #OcadoGroup #OcadoGroupResults $OCDO pic.twitter.com/RJWbfjPHse
— Ocado Group (@OcadoGroup) July 6, 2021
Steiner said changes in customer habits over the past year would endure as more shoppers order groceries online. “It is increasingly clear that the landscape for grocery worldwide has changed for good,” he said.
Ocado’s core retail business had 777,000 active customers at the end of the period, 137,000 more than a year ago.
While the average basket size declined from £167 a year ago to £129 as relaxed coronavirus restrictions reduced customers’ need to stockpile, it remained above the pre-pandemic level of about £105.
Ocado Solutions CEO @LukeJensenOcado: "We have taken 4 of these partners live in just over a year. And in the past few months, we have already taken more CFCs live than we did during the whole of last year."#OcadoGroup #OcadoGroupResults $OCDO pic.twitter.com/O2zk72yk1w
— Ocado Group (@OcadoGroup) July 6, 2021
Ecommerce has a more than 13 per cent share of the UK grocery market, Ocado said. “The channel shift that’s still to go on is enormous,” Steiner said.
Shares in Ocado were up 2.6 per cent to £20.36 in morning trading. The shares have gained more than 60 per cent since the start of 2020, although they have lost almost 14 per cent this year.
Despite the positive first quarter in its core retail business, Ocado left its full year financial outlook unchanged.
The food stores say there are signs of pre-Covid shopping habits returninghttps://t.co/22TKN6TMgJ
— BBC Wales News (@BBCWalesNews) July 6, 2021
The company said it was facing higher costs at its “solutions” business, which helps other retailers develop their own ecommerce offerings. As a result, it expected profits from these operations to be £30m lower than had been anticipated.
Ocado, which has technology partnerships with retailers including Kroger in the US and Sobeys in Canada, announced a new deal with Auchan Retail in Spain.
The company produced an operating profit of £14.1m in the 26 weeks to May 30, but remained lossmaking at a pre-tax level. Financing costs resulted in a loss before tax of £23.6m, although this was narrower than the £40.6m a year ago.
Ocado reports a drag in earnings from its robotic warehouse business https://t.co/21Pmdsjigh
— Bloomberg Markets (@markets) July 6, 2021
