Ocado (OCDO) shares fell 10% today after annual results showed that pretax loss widened to £500.8 million from £176.9 million a year before. No dividend was declared, unchanged from a year before.
Shares fell 62p to 562p, meaning they fallen nearly 60% since this time last year.
The online grocer and warehouse technology firm said group revenue in the year ended November 27 amounted to £2.51 billion, up 0.6%, from £2.50 billion. Revenue fell short of consensus of £2.54 billion, however.
Customer numbers increased by 13% to 940,000 from 832,000 a year earlier. There was a 5.6% increase in average orders per week to 377,000. However, average basket value fell 8.5% to £118.
Revenue at Ocado’s warehouse technology units improved. UK Solutions & Logistics yearly revenue rose 13% to £802.7 million, while at International Solutions, it more than doubled to £147.8 million from £66.6 million.
Analyst Reaction
Chris Beauchamp, chief market analyst at IG Group, said: “As supermarket prices keep rising, Ocado’s premium offering remains under pressure, and as volumes refuse to rise in line with customer numbers, Ocado is having to run faster and faster just to hold its position. All supermarkets are watching costs closely, but Ocado finds itself at the sharp end and is going to struggle over the next six months and beyond given that inflation stubbornly refuses to come back down.”
“Ocado: so much promise and so little joy,” said Russ Mould, investment director at AJ Bell. “The retail joint venture with Marks & Spencer looks stuck in the mud. Consumers are pulling back from doing big shops which is problematic for Ocado. It’s more cost and time efficient to fill a van with a big customer order than lots of little ones, so the shift in shopping behaviour creates a headwind.”
Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown said: “Despite a 13% increase in active customers, volumes haven’t followed suit, meaning the cost to serve all those online orders has become a burden. Ocado is in the eye of the cost-of-living storm because its offering isn’t synonymous with being the best value, it’s a higher-end option, without the same benefits of enticing people in with tangible, physical goods like M&S or Waitrose can.”
Grocer Inflation at a Record
Looking ahead, Ocado expects retail growth in the mid-single digits for 2023, with technology to see around 40% Ocado Smart Platform fee revenue growth, and UK Logistics to be “broadly stable”.
The firm’s grocery market share improved to 1.9% from 1.8% in the 12 weeks to February 19, according to the latest Kantar survey. Ocado sales grew by 11% on-year.
In wider retail news, grocery inflation hit a record of 17.1% in the four weeks to February 19, according to Kantar. This means the average UK household is likely to see an £811 increase to their annual bill if inflation continues at the same pace.
Sainsbury’s and Tesco saw their market shares decrease marginally, but sales were up 6.2% and 6.6%, respectively.
