Ocado slumps to full-year loss

Grocer warns investment in new warehouses and IT systems will knock down earnings

Ocado is planning to fork out £210m over the year ahead (Reuters)

Online grocer Ocado has slumped to a full-year loss and warned that earnings will be knocked by the cost of developing its new warehouses and IT systems.

The group reported a pre-tax loss of £500,000 on a 52-week comparable basis to 3 December, down from profits of £12m a year earlier, despite seeing sales rise 12.4 per cent.

It cautioned that underlying earnings in the 2018 financial year would "reflect" the costs of investing in its UK logistics hubs, which include a distribution centre in Andover, Hampshire, and its technology platform.

The group – which delivers food for supermarkets Waitrose and Morrisons as well as own-brand goods – is planning to fork out £210m over the year ahead, while it also announced that it was issuing an extra 5 per cent of its share capital with investors to raise money for its technology business.

It said full-year sales are expected to rise by 10 per cent to 15 per cent over the 2018 financial year, which would mark a slowdown on growth in previous years.

But it expects earnings to “improve significantly" for the 2019 financial year thanks to investment in the business.

Ocado chief executive Tim Steiner said: "Now is the time to take advantage of our growth opportunities.

"We will invest to ramp up our new solution in both Erith and Andover and to have the right resources in place to meet growing demand for the Ocado Solutions offer.

"We believe that taking advantage of these international opportunities now will make our virtuous cycle turn faster in the years ahead."

Ocado is looking to broaden itself from a UK online delivery grocery service into a technology provider that offers warehouse capability and digital commerce platforms to other retailers worldwide.

It recently signed its third international partnership and its first foray into North America after reaching a deal with Canadian retailer Sobeys.

The group had already announced a partnership with French supermarket giant Groupe Casino late last year, having struck its first international deal in early June, although it has so far kept the customer anonymous.

Its full-year results also show that, while it fell into the red on a bottom-line basis, retail earnings lifted 4.5 per cent to £79.2m for the 52 weeks and order numbers rose 14.3 per cent to an average of 263,000 orders per week.

Ocado said its average basket value dropped slightly to £107.2 as new trends of shopping via mobile phone and using its Ocado Smart Pass saw customers order fewer goods but more often.

PA