Ocado earnings soar amid online shopping boom during pandemic

Holly Williams, PA Deputy City Editor

Ocado has said shopping habits have changed “for good” as it revealed annual earnings soared 69% after demand for online grocery shopping rocketed amid the pandemic.

The online grocer posted underlying group earnings of £73.1 million for the year to November 29, up from £43.3 million the previous year, as revenues rose a third to £2.3 billion.

Earnings in its retail arm, a joint venture with Marks & Spencer, more than trebled to £148.5 million, up from £40.6 million the previous year, on sales up 35.3%.

On a bottom-line basis, it narrowed pre-tax losses to £44 million from £214.5 million as the online shopping boom helped offset heavy investment.

Chief executive Tim Steiner said: “The rapid acceleration of many pre-existing trends in business and society has been a feature of the Covid-19 crisis and the dramatic channel shift in grocery is a clear example of this.

“The landscape for food retailing is changing, for good.”

He dismissed calls for an online sales tax following Tesco’s plea for the Chancellor to introduce a 1% levy for internet competitors as “wholly inappropriate”.

Mr Steiner said: “I don’t think it’s appropriate for anyone to put a sales tax on a retailer because they operate from different premises or are an efficient operator.”

On calls for a windfall tax for those sectors that have benefited amid the pandemic, he added: “People who make profits generate taxes.”

Ocado pledged to invest an extra £30 million in technology to meet the surging demand during the pandemic and said it is hiring another 600 staff in its IT division, after taking on 500 in 2019-20.

But it warned that retail sales growth over the current year is dependent on Covid-19 restrictions as it said the pandemic will continue to have a “significant impact on group performance”.

It said the planned opening of three new high-tech warehouses will support greater availability of delivery slots for customers while it is also set to ramp up the rollout of its new Zoom rapid same-day service within London and inside the M25.

The group’s first Zoom site is full, with a second secured and it is on the lookout for another 12.

Ocado’s results showed that its average basket value jumped to £137 from £106 due to the surge in demand.

The figures also revealed that its UK solutions and logistics division, which provides services to the Ocado and M&S joint venture, alongside a contract with Morrisons, saw underlying profits fall 38.4% to £44.4 million.

But sales at the division rose by 13.6% over the year.

The firm added that legal costs are expected to be significantly higher this financial year due to a lawsuit filed by Norwegian technology and robotics manufacturing company AutoStore against Ocado over alleged patent infringement.

Ocado said: “Having analysed the claims, we remain of the view that we do not infringe any valid AutoStore rights.”

Shares fell 3% despite the earnings boost.

John Moore, senior investment manager at Brewin Dolphin, said: “Ocado has redoubled its commitment to heavily invest in its offering, seeking faster growth through new capacity and technology innovation – while this is yet to translate into profit, it places the business very well for the future.”

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