Ocado has reported a sharp rise in sales and profits at its online grocery business thanks to booming demand during the pandemic but said that customer numbers had fallen during the year.
Underlying profit for the year to the end of November 2020 at Ocado Retail, the group’s joint venture with Marks and Spencer, was well ahead of forecast at £148m against £40m last year.
But capacity constraints meant customer numbers fell from 795,000 to 680,000 over the year, Ocado said. This was cancelled out by the larger number of orders and an increase in average order size to £137 from £106, meaning that overall sales grew 35 per cent.
The group is planning to increase capital spending in 2021 but signalled that its ability to serve new customers in the UK would continue to be limited.
Ocado will open a smaller version of its fulfilment centres in Bristol shortly, while capacity at another centre in Kent will be increased. But two new warehouses, one of which replaces a unit destroyed by fire in 2019, will only start to operate towards the end of the year.
Tim Steiner, Ocado’s chief executive and one of its three co-founders, said he did not expect the online grocery shopping market to shrink as the pandemic eased.
“Even if those people who have been vaccinated prefer shopping in store, there are others behind them that still want to take advantage of online services,” he said. “Once people have tried this three to five times, they tend to stick with it. It will just keep growing.”
Ecommerce accounted for about 7 per cent of the market before the pandemic. It is now about 14 per cent.
The company will also open two more fulfilment centres for third-party clients this year, having opened two in 2020. Ocado is building dozens of these centres to commercialise its technology and expertise, but accounting rules stipulate that these revenue streams can be recognised only once they are operating.
Ocado said that technology and solutions revenue would rise to about £50m in the current year, from £16m in 2020, and that £256m of revenue was awaiting recognition. But those numbers remain small compared with the group’s £2.3bn of total sales and its £20bn market value.
The investment required to build the centres is the main reason for a forecast increase in capital spending, from £525m in 2020 to a projected £700m this year. Ocado has more than £2bn of cash and borrowing facilities on hand, having raised money in both the equity and convertible bond markets during 2020.
Several of the group’s clients, which include Kroger in the US, ICA in Sweden and Aeon in Japan, have chosen to deploy Ocado’s in-store picking technology but Steiner stressed this did not represent a weakening of Ocado’s commitment to large distribution centres.
Ocado’s share price rose by more than 80 per cent during 2020, but was down 3 per cent in morning trading on Tuesday.
The company also warned of an increase in litigation costs from the £2.7m reported in 2020. Ocado is embroiled in two high-profile legal cases: one against a rival company set up by another of the co-founders, and one against Norwegian rival AutoStore, which has accused Ocado of violating its patents.
https://news.google.com/__i/rss/rd/articles/CBMiP2h0dHBzOi8vd3d3LmZ0LmNvbS9jb250ZW50L2YyN2E1ZTI3LTU1MTktNDc3NC05YWI1LTVmYjExZDRhODM0ZNIBP2h0dHBzOi8vYW1wLmZ0LmNvbS9jb250ZW50L2YyN2E1ZTI3LTU1MTktNDc3NC05YWI1LTVmYjExZDRhODM0ZA?oc=5
2021-02-09 11:14:43Z
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