Ocado sales jump 20% as it fights off competition from rapid delivery rivals

Ocado has seen revenues continue to climb over 20 per cent in the first half despite the easing of lockdown restrictions, but investors have raised concerns about growing challenges to its model.

The online grocery giant reported group revenue growth of 21.4 per cent to £1.3 billion in the 26 weeks to May 30, compared to the same period a year earlier.

Its joint venture with Marks & Spencer and only remaining consumer facing arm, Ocado Retail, also saw sales jump 19.8 per cent to £1.2 billion over the period, more than doubling its EBITDA to £104.1 million.

Meanwhile its UK-based solutions and logistics arm also saw a slight profit increase of 6.4 per cent to £30.1 million, helping group EBITDA more than triple to £61 million.

READ MORE: Ocado loses major court battle against rival AutoStore as patent infringement case heats up

Despite this, Ocado once again failed to turn a profit, reporting a loss before tax of £23.6 million, though this did fall significantly from £40.6 million a year earlier.

This was in part due to increased investment in its international solutions arm, which sells its fulfilment technology to third party retailers, posting a loss of £56 million.

Ocado has also ramped up investment in its automated customer fulfilment centres (CFCs) and accompanying robotic technology, including its Smart Platform technology which is yet to see a significant increase in revenues.

Analysts believe that Ocado is delaying a return to profit, which is not expected until 2024, in order to ward off increasing competition from rapid delivery startups like Weezy, Gorrilas and Jiffy, all which outpace Ocado’s delivery times significantly.

Analysts at AJ Bell said the rise in these startups is “forcing fresh investment (from Ocado) in new micro-sites customer fulfilment centres and thus again delaying that return to profit”.

Publicis Sapient’s retail analyst Andy Halliwell added: “At first glance the significant uptick in revenue from the same period last year, sees Ocado continuing to fare well, with online grocery having been bolstered by Covid-19. The Ocado model is proven to work.

“However, they still failed to make a profit, reporting a loss before tax of £23.m – although, some £17m less loss than last year. But in my opinion, Ocado seems to be looking a little risky right now. They’ve just invested a lot of money in their new Smart Platform technologies that are yet to bring in significant additional revenues, and their position in the grocery automation market is a premium one.

“This is why a number of international grocers are reportedly deciding to use alternative technologies, at least whilst they get their home delivery propositions off the ground. The COVID-19 bubble that Ocado saw a significant boost from is now on the wane with reduced basket sizes reported by the retail division.”

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