Ocado posts £40.6m loss despite huge spike in sales during lockdown

Ocado’s share price has crashed 2.6 per cent in morning trading after its group profits dropped by 36 per cent despite seeing a huge boost in sales during lockdown.

The online grocer saw revenues rise a whopping 27 per cent in the half year to May 31 to £1.02 billion, reflecting a major spike in demand for its retail arm.

Ocado Retail, the company’s new joint venture with retail stalwart Marks & Spencer, saw EBITDA rise 87 per cent to £45.7 million in turn.

Despite this dramatic rise in revenue, Ocado struggled to match the runaway online sales increases seen at market leaders Tesco and Sainsbury’s who were able to rapidly expand their online delivery capabilities.

Ocado’s almost entirely automated warehouses meant that it could not so easily expand its capacity, forcing it to stop accepting new customers at the beginning of UK lockdown laying bare a major drawback of its high-tech operations.

READ MORE: Ocado is relaunching its app after being forced to scrap it in March due to 1000% jump in traffic

This didn’t stop the company throwing its full weight behind its automated logistics technology, having made major investments in its Ocado Solutions arm which ultimately saw it make a loss of £40.6 million overall in its first half.

This was still considerably less than the £147 million loss made it made over the same period last year.

Ocado UK Solutions & Logistics, which sells its automated technology to third party retailers throughout the UK, saw revenues increase nine per cent but profits before tax dive nearly 30 per cent to £29.3 million.

Its international solutions arm, which opened two Customer Fulfilment Centres (CFCs) in France and Canada during the period, saw “invoiced growth of 40 per cent or more” but still made a loss of £10.1 million.

The retailer said this loss was due to its “continued investment in improving the platform and building the business, and from increasing support costs with the launch of initial CFC sites.

Its forecasts for the future remained cautious, stating it was unable to predict revenue growth for the full year due to “uncertainties over the scale, and duration, of the ongoing impact of social distancing” in the UK.

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1 Comment. Leave new

  • Avatar
    Stuart Bird
    July 14, 2020 7:56 pm

    What a surprise! They have done exceptionally well at spinning their tale and suckered in the naive investment analysts who believe you value a business by its turnover. Well, in an environment perfectly suited to their tale, what has happened? Further losses.
    Where to next with their BS story? Undoubtedly they have done some very clever stuff but it has not delivered any ROI. Costs continue to rise at at faster rate than sales?!?

    Reply

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