Despite pandemic boom, Ocado delivery still to deliver on profits

6 July 2021 | 26 Shares

An Ocado delivery van parks outside a residential address in north west England. (Photo by Paul ELLIS / AFP)

British online food retailer and delivery outfit Ocado said this week that its first-half net losses deepened on the back of heavy investments made to help meet booming demand for online, contactless delivery during the pandemic.

Losses after tax hit £77.8 million (approximately US$108 million, or 91 million euros) in the first half of its financial year or six months to May, Ocado said in a results statement. That was worse than the £57.4 million loss posted in the same period of 2020, when the Covid-19 crisis erupted and sparked heightened demand for online food supplies and delivery services, which Ocado has been carving out a worthy niche over the past few years.

However, Ocado added that earnings before interest, taxes, depreciation, and amortization (EBITDA) more than tripled to £61 million in the first half of 2021. And sales surged 21.4% to £1.3 billion in the reporting period, despite the easing of coronavirus curbs in England over the past few months since March.

Ocado sells food via its app and website under a landmark tie-up with traditional high-street retailer Marks & Spencer, and also sells its technology to supermarket firms around the world. The company has ramped up investment in highly automated customer fulfillment centers, as more people switch to online grocery deliveries.

“As we head towards a post-Covid-19 future, it is increasingly clear that the landscape for grocery worldwide has changed, for good,” said chief executive Tim Steiner. “Over the last eighteen months, we have shown that the Ocado model works even in the most challenging and fluid of environments.

“That ours is a proven model in online grocery has been again demonstrated by the strong performance of Ocado Retail, the historic core of the Ocado business, which has led the market in customer experience, increasing sales by 20 percent in the period, thanks to a significant increase in customer numbers, while continuing to show sustainable and industry-leading profitable growth.”

Ocado has signed a deal with Auchan to help develop online activities, including as a client of its robotics-driven warehouses, of the French giant’s Spanish division Alcampo, it added. The growth at Ocado’s retail arm shows that while the average online purchase is getting smaller since lockdown restrictions eased, more clients are using the service.