News Column

Ocado delivers a profit but sales growth slowing

July 2, 2014


SHARES in Ocado slid 4.3 per cent yesterday despite the online grocer moving into the black in the first half, paving the way for its first annual profit in its 13-year history.

The company said pre-tax profits totalled 7.5m for the 24 weeks to 18 May, following a 3.8m loss last year, thanks to its 216m online tie-up with Morrisons.

Gross sales rose 15.6 per cent to 442.4m, down from 18 per cent growth in the first quarter.

Steiner attributed the slowdown to "cautious consumer spending" and lower prices in the sector: "The pricing action is hurting the profitability and sales of all grocery retailers.

"We have continued to invest in our pricing to create a better proposition to customers...that has cost us a few millions of pounds in terms of profitability," he said.

Ocado said has also secured a site for a third distribution centre in Andover, in Hampshire. It will cost 80m to build and will be financed by a new 100m borrowing facility.

Andover will be about a third of the size of its two other warehouses and Ocado aims to use this smaller model to secure distribution deals with other retailers besides Morrisons.

Jefferies analysts yesterday raised fears over the Ocado's contract with Waitrose, saying its early termination was a "real threat".

The contract has an early termination provision for 2017 but Steiner said "currently nobody has announced its intention to use that".

THE DEBATE: Page 17 .

.Ocado Group PLC p 385 355.00 1 Jul 380 375 370 365 360 355 350 30 Jun 1Jul 25Jun 26Jun 27 Jun

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Source: City A.M. (UK)

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