Ocado losses top £500m as costs rise and online shopping slips

Annual losses at Ocado have skyrocketed as customers shopped less online and costs were driven up by inflation and technology spending.

The online supermarket reported that pre-tax losses rose from £176.9m in 2021 to £500.8m last year, more than £100m above analysts’ expectations.

While the number of active customers increased by an additional 108,000, total sales remained flat as customers placed smaller orders on average in response to cost-of-living pressures. Meanwhile, higher prices only partially offset the trade loss.

Many Britons who had turned to Ocado during the lockdown era have also started doing more of their weekly shopping in stores following the easing of coronavirus restrictions.

As a result, revenues from the UK retail division, a joint venture between Ocado and Marks & Spencer, fell 3.8 percent, although they were still 40 percent higher than before the pandemic.

Overall sales grew marginally thanks to the opening of several new warehouses and the company’s technology sales as part of partnerships with supermarket giants such as Morrisons and US-based Kroger.

But the cost of developing and rolling out the Ocado Smart Platform technology and launching more customer fulfillment centers (CFCs) and the first “Zoom” on-demand sites drove the retailer’s losses soaring. .

Ocado has opened 17 warehouses in the past two years, including the first in Sweden, a second in Canada, and others in major US cities such as Atlanta, Georgia; Chicago, Illinois; and Baltimore, Maryland.

Costs were further exacerbated by inflationary pressures resulting from rising utility and fuel bills amid rising oil and gas prices, increased marketing spending, and rising employee and wage rates.

In September, the Hertfordshire-based company said it was looking at alternatives to dry ice, an ingredient often used to refrigerate frozen foods, due to higher refrigeration costs.

Chief executive Tim Steiner admitted that Ocado, like all companies, had been “tested over the past year by a combination of macroeconomic and geopolitical headwinds.”

Still, he struck a positive note, claiming that the company “more confidence in our model than ever before’ and would become cash flow positive from the existing CFCs within the next four to six years.

This could not be avoided Ocado Group Shares from a 7.5 percent drop to 577.8 p on Tuesday morning, making them the biggest faller on the FTSE 350 Index.

Over the past two years, the company’s stock has also lost about 72 percent of its value as the Covid-induced boom in digital grocery buying has fizzled out.

Russ Mould, investment director at AJ Bell, said the results were “as tasty as a bucket of sick” and that the retail business appears “stuck in the mud,” adding: “Consumers are pulling back from doing big stores, which is problematic for Ocado.

“It is more cost and time efficient to fill a van with a large customer order than with a bunch of small ones, so the shift in shopping behavior is creating headwinds.

“Ocado has long argued that it must spend money to make money, but the long-suffering shareholders are running out of patience.”