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Ocado reports 11% grocery sales growth despite fire in robotic fulfilment centre

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Ocado says its grocery sales are up by 11.2% despite the fire that hit its Andover fulfilment centre in February. The fire, it says, hit sales by the equivalent of 1.2% of sales in the quarter.

Ocado’s retail revenues, which include sales via, Fetch, Fabled and from wholesale partnerships, came in at £404.0m in the 13 weeks to March 3, with average orders per week up by 11.3% to 314,000. The average order size fell slightly at the same time, by 0.2% to £110.24 from £110.45 at the same time last year, continuing the trend that had previously been seen. Ocado is a Top100 retailer in IRUK Top500 research

The retail group’s tech arm, Ocado Technology has said that its Andover fulfilment centre, where the fire broke out in the early hours of February 5, includes “a robot grid that represents a breakthrough in technology and engineering” and at full capacity, will process more than 65,000 orders a week. Here’s an Ocado Technology tour of the fulfilment centre, which shows how it uses a real time system similar to those used in aircraft control. 

In today’s update, the retailer said that the causes of the fire, which the retailer said in February broke out in a corner of the ambient grid and subsequently spread, resulting in the roof of the centre collapsing, were still being investigated. Its initial assessment was that there were no significant implications for risks related either to its equipment or to its underlying business model. That’s important because the technology is part of the Ocado Smart Platform model that Ocado Group is licensing to third-party retailers including US supermarket giant Kroger and France’s Groupe Casino. 

Ocado Group is now working on rebuilding the fulfilment centre, and has set up a temporary spoke for its hub and spoke fulfilment model in Andover in the meantime.

Ocado chief executive Tim Steiner said: “Our first quarter was characterised by continued strong underlying growth in Ocado Retail but also the initial impact of the fire at our CFC in Andover on our headline numbers.

“The fire has been a setback, but it will be only a temporary one. Over the last few weeks, our teams have been working hard to minimise any disruption to our customers and we will build a state-of-the-art replacement facility that reflects all the innovations and improvements we have made since Andover opened in November 2016.

“At the same time we all remain focused on delivering customers the very best service, quality, choice and value. Our commitment to these objectives underpinned the underlying progress we made in the quarter.

“With the joint venture signed with M&S at the end of February, Ocado Retail has never been in a stronger position to lead channel shift while constantly setting the bar for excellence in online grocery in the UK. We are looking forward to the future with excitement and determination.”

Industry reaction

Commenting on the figures, Thomas Brereton, retail analyst at data and analytics company GlobalData, said the retailer appeared to have brushed aside a fire that “destroyed large parts of its principal UK distribution centre in Andover in the middle of the quarter”. 

He said: “Even more impressive than its growth numbers has been Ocado’s continued ability to shell and deal in the face of its combustion complications – most notably the announcement of a new £1.5bn 50/50 joint venture with struggling M&S Food, set to displace Ocado’s long-standing supply partner Waitrose in September 2020. And although food market analysts remain divided on whether this is a good deal for both parties (particularly with respect to the potential loss of Waitrose-loyal shoppers at Ocado), the consensus is that Ocado has emerged from negotiations in a much stronger position. Investors certainly seem to agree, with the brief fall in share price after the fire all but forgotten as it hit an all-time high in early morning trading today, sending market cap up to £8.3bn – abut 55% larger than that of the UK’s second-largest grocer Sainsbury’s.  The key for Ocado now is to focus on longevity.”

Image courtesy of Ocado

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