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Ocado sales grow while pre-tax losses widen, following Andover fulfilment centre fire

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Ocado today posted growing first-half sales and but widening pre-tax losses after a half-year that included a fire at its Andover fulfilment centre, the piloting of its Ocado Zoom one-hour delivery service, and the sale of half its retail business to M&S. 

The technology innovator and grocery retailer said that over the course of the half-year the centre of gravity in its business had shifted – as it moves its focus away from its own grocery delivery business and towards supplying its own ecommerce and fulfilment software and robotic infrastructure to third-party retailers around the world. In the half-year it signed a new agreement with Coles Group in Australia, and extended its partnership with Sobeys in Canada. These add to existing agreements with retailers including UK and US grocers Morrisons and Krogers. Its first customer fulfilment centres (CFCs) for Groupe Casino and Sobeys are expected to open next year.

It has also sold half of its grocery delivery business to M&S, and from September 2020 will operate the business as a joint venture with the high street multichannel business. 

Its Ocado Zoom one-hour delivery service is now running from a single test site. So far, it said, “strong customer response and operating metrics to date reinforce our confidence that we can help partners to serve and shape this new market segment, profitably, at scale.”

However the retailer is losing fees as a result of the fire that destroyed its Andover fulfilment centre in February, and removed 10% of its fulfilment capacity, since Morrisons has agreed not to use its capacity in the Erith, North London, centre temporarily in order to give Ocado room for its own operations. Insurance payouts are expected to cover those costs in due course. 

Today Ocado Group reported revenues of £882.3m in the six months to June 2, 10.5% up on the same period last year. But pre-tax losses widened by 233% to £142.8m, from a loss of £13.6m last time after one-off costs of £99m, mostly related to February’s fire at the Andover fulfilment centre. Before those costs, EBITDA (earnings before interest, taxes and asset writedowns) came in at £18.1m, down from £34.3m a year earlier.

After the end of the period, Ocado also agreed to sell its Fabled business to Next. The beauty business, set up in 2016 and run in partnership with Marie Claire, sells online and via a shop on Tottenham Court Road, London. 

“In the last six months the centre of gravity at Ocado Group has shifted,” said Ocado chief executive Tim Steiner. “Our exciting new joint venture with M&S creates further growth opportunities for both parties in the UK and allows Ocado Group to increase focus on growing our Ocado Solutions business and innovating for our partners. At the same time, we are beginning to apply our technology skills and expertise to other related activities which we expect to be of benefit to our Solutions partners as well as to other Ocado Group stakeholders.

“The innovation factory we have created is founded on a near twenty-year heritage of constant reexamination and reinvention of technology to provide the best customer experience. We have never had as many opportunities to grow as we do today. As we look to successfully scale our business and deliver outstanding execution to our partner, our challenge will be to select and prioritise the most attractive of these opportunities.”

Ocado is a Top100 retailer in IRUK Top500 research.

Image courtesy of Ocado

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