Ocado shares drop on sales warning after warehouse blaze

Online grocer Ocado has seen shares tumble after it warned over a sales hit following a major fire at its warehouse in Hampshire that took more than 24 hours to bring under control.

Around 200 firefighters were drafted in to tackle the blaze at the site in Andover, which broke out at 2.44am on Tuesday and spread overnight, causing substantial damage.

The retailer’s shares dropped 8% as it said it would see a fall in sales growth until it can shift operations to other warehouses.

The hi-tech robotic warehouse provides around 10% of Ocado’s warehouse capacity, processing more than 30,000 orders a week.

Ocado said the shutdown means there will be a “constraint on our ability to meet our growing customer demand”.

It added: “There will be a reduction in sales growth until we can increase capacity elsewhere.”

Ocado said it had been forced to cancel some customer orders because of the fire and it was “working hard to resume normal service as soon as possible”.

Customers took to social media when deliveries failed to turn up, but Ocado has not given details of the extent of the impact on orders.

The fire was declared a major incident as it swept through the building and locals were urged to keep their windows and doors shut due to the smoke.

Ocado said the fire, which started in a corner of the ambient grid, caused substantial damage to the majority of the building and its contents.

Part of the roof collapsed, but the firm confirmed no members of the Ocado team or the public were injured.

Hampshire Fire and Rescue Service said four firefighters had been treated for slight smoke inhalation.

One local tweeted during the blaze: “Just streets away – the noise, heat, smell and light pouring from the Ocado warehouse is frighteningly real.

“120+ firefighters are risking their lives tackling the blaze. Makes you truly appreciate the brave men and women of the Fire Service!! Thank you. Stay safe.”

Ocado stressed it has comprehensive insurance for the property, stock and equipment and for business interruption losses.

“Once we have had time to assess the damage and prepare a plan to return the CFC (customer fulfilment centre) to operation we will update further as appropriate,” Ocado said.

Retail expert Bruno Monteyne at Bernstein said the sales impact was a “material dent in the UK retail business”.

He said it was unclear whether the cause of the fire – which remains unknown – has “any implications” for Ocado’s technology platform.

The Andover plant is one of four automated warehouses built by the group, which have enabled it to win a number of major international deals providing IT solutions to other retailers.

On Tuesday, Ocado reported a 12.3% rise in annual sales to £1.59 billion, but saw pre-tax losses widen to £44.4 million – against an £8.3 million loss the previous year – due to costs of developing its new warehouses and IT systems.