Ocado profit dented by investment costs as M&S deal rumours swirl
The group reported a pre-tax loss of £44.4 million.
Ocado’s chief executive refused to be drawn on speculation it is close to signing a deal with Marks & Spencer, as the online grocer reported a year of widening losses after it was knocked by investment costs.
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The group reported a pre-tax loss of £44.4 million in the year to December 2, which compares to an £8.3 million loss the previous year.
Sales rose 12.3% to £1.59 billion, but earnings fell 20.7% to £59.5 million as the company counted the cost of developing its new warehouses and IT systems, as well as an accounting change.
The results come as Ocado is mooted to be in talks with M&S to ink a food delivery deal.
Ocado currently has a tie-up with Waitrose, but it has been suggested that M&S would step into the breach when the existing contract ends next year.
However, when pressed on the talks, chief executive Tim Steiner kept his cards close to his chest.
“We are in the business of talking to retailers, we’re constantly talking to retailers around the world. We are not going to deny or confirm,” he said.
“We have a good relationship with Waitrose and we enjoy selling their products to customers.”
Under the terms of the Waitrose deal, which expires in 2020, Ocado cannot sell own label products from rival retailers of a similar size.
If the M&S deal goes ahead, it will be the latest in a long line of tie-ups the firm has announced.
Ocado has got into bed with US retailer Kroger, Swedish supermarket group ICA, France’s Groupe Casino and also in Canada with Sobeys.
Retailers are keen to use its cutting-edge technology, which includes robots in warehouses.
On Brexit, Mr Steiner said that keeping vital supply routes open is essential to avoid food shortages after Britain exits the EU on March 29.
He also admitted that Ocado is stockpiling components and mechanical spare parts for its warehouses, but warned that fresh food cannot be horded.
Shares were down 0.5% at 987p.
Last year, Ocado’s active customer numbers grew 11.8% to 721,000 and total order volumes increased 12.1% to an average of 296,000 orders per week.
However, average basket values were slightly lower at £106.85 versus £107.28, driven by an increase in prices.
Looking ahead, Ocado said it is confident in achieving revenue growth in retail of between 10‐15% this year
However, the grocer expects a decline in earnings as costs linked to its customer fulfilment centres continue to rise.
Total capital expenditure for the group is expected to be £350 million.