Ocado losses narrow but shoppers eat less at home as restrictions ease

Online grocer Ocado has said half-year losses narrowed sharply as sales surged, but revealed shoppers have begun returning to some pre-pandemic habits due to easing restrictions.

The group posted a £23.6 million loss before tax for the six months to May 30, down from losses of £40.6 million a year earlier.

Underlying earnings – the company’s preferred measure – rose 41% to £61 million.

It said revenues for its retail joint venture with Marks & Spencer jumped 19.8% higher in the first half to £1.2 billion.

This comes as a marked slowdown on the 39.7% sales rise notched up in the first quarter to February, but boss Tim Steiner insisted the switch to online grocery shopping would stay after the pandemic.

The group said shopper basket sizes in the second quarter moved towards pre-pandemic levels, ending the period 10% lower than the average for the first half as a whole, as the reopening of hospitality saw customers eat fewer meals at home.

But it said revenues continued to lift in the second quarter thanks to a strong rise in the number of customer transactions, which helped offset the dwindling basket sizes.

Average orders each week stood at 390,000 a week in its second quarter, up 40% on a year earlier.

Ocado said: “Though uncertainties remain regarding the performance of Ocado Retail in the second half as Covid restrictions continue to ease, we are encouraged by the performance in the second quarter, which shows a strong increase in customer transactions offsetting the normalisation of the value of the average basket.”

Mr Steiner, chief executive of Ocado, added: “As we head towards a post-Covid-19 future, it is increasingly clear that the landscape for grocery worldwide has changed, for good.”

The group also announced its latest international deal, with Auchan Retail to develop Alcampo’s online business in Spain, where it runs a network of 310 stores, as the rollout of its overseas technology offering and robotic distribution warehouses continues to pay off.

But investments in the technology side of the business and its overseas offerings continues to weigh, and the group said it is expecting a £30 million lower earnings contribution from its businesses outside the core retail operation.

This will be offset by the ongoing strength in its retail business though, and Ocado said its full-year outlook remains the same.

Sophie Lund-Yates, senior equity analyst at Hargreaves Lansdown, said: “Even as shopping trends start to normalise, and basket sizes are no longer swelling, the group’s doing well with an increased number of orders per week.”

But she said: “The fly in the ointment where Ocado is concerned is the speed at which it’s building scale.

“Progress to date can’t be knocked, but ideally this needs to move up a gear if it wants to capture a bigger chunk of available demand.”