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Ocado profits slide after distribution centre investment

Online grocer sees pre-tax profits fall 18.1 per cent after opening third 'customer fulfilment centre'

Ocado profits slide after distribution centre investment

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Ocado suffered a 18.1 per cent drop in half-year profits after investing in a new distribution centre, but saw revenues rise 12.5 per cent to £659.6m.

Pre-tax profits at the online retailer dropped by £1.7m to £7.7m in the 26 weeks to 28 May 2017 following investment in its third ‘customer fulfilment centre’ in Andover, Hampshire.

However retail revenues continued to rise thanks, in part, to a 15.6 per cent increase in order volumes to an average of 260,000 orders per week, and a 12.7 per cent hike in the number of active customers to approximately 600,000.

Ocado welcomed the recent acquisition of Whole Foods by Amazon as “a positive catalyst” for international sales, coming under pressure in recent years for its slow international expansion.

But the online grocer remained secretive about its deal with an undisclosed European retailer, signed in June, to set up an online grocery delivery service – an agreement it said would be the “first of many”, according to Reuters.

The mystery retailer is Ocado’s first overseas client for its Ocado Smart Platform (OSP) – software and technology to help retailers launch or improve their grocery business – and the group said it was speaking to "multiple retailers" about contracts using OSP.

Commenting on the results, announced on 5 July, Ocado’s CEO Tim Steiner said: “I am pleased to announce another period of consistent customer, revenue and order growth, as well as improved operating efficiencies within our UK retail business.

“In addition, I am delighted to have announced our first OSP agreement with a European retailer.

“After several years of price deflation in the UK, we have seen this begin to ease in the period and, when combined with our increasing scale and operational efficiencies, this trend will support the continued profitable growth of our retail business.” 

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