Ocado pre-tax losses narrow

The group said it made EBITDA of £27.9m in the year to November 27, 2011 up 26.6% on last year’s £22m, in line with analysts forecasts following Ocado’s December profit warning.

Annual revenues jumped to £598.3m from 2010’s £515.7m thanks to 18.6% growth in average orders per week.

The average order size decreased by 1.7% to £112.15 from £114.06 in 2010 and capacity at its Hatfield distribution depot “significantly increased” to deliver 131,381 orders in peak week.

Ocado said in December earnings had been hit by higher staffing costs as it dealt with capacity constraints at its main distribution depot in Hatfield, north of London.

The business enjoyed a 16.6% rise in sales in December and recently launched a new Savings Pass which offers savings on more than 600 products at a cost of £8.99 to the shopper.

Ocado’s own-label range at year end comprised 620 products, up from 250 products in 2010 as it reduced its dependence on Waitrose’s product range.

The company said it expects its growth rate to improve and is “well positioned” to capture growth in the online grocery market.

IGD data forecasts the online channel is set to almost double in value in the next five years to reach £11.2bn, up from £5.9bn in 2011.

Ocado chief executive Tim Steiner said: “Against the backdrop of a weak UK economy, we have continued to see the development of the online grocery retail market. We believe this growth is evidence of a structural shift in consumer behaviour and we will continue to see an expansion of the online grocery retail market.

“We will continue to pursue our existing strategy in 2012 to improve what we offer our customers and increase our capacity to meet growing demand. It is our mission to make sure that customers continue to regard Ocado as the home of the market-leading offer in online grocery shopping.”

John Ibbotson, managing director of the retail consultancy Retail Vision, said: “Despite a brief uptick in pre-Christmas sales, it has been a pretty tough year for Ocado.

“Much will be made of the 16.6% increase in gross sales over 2011. This is a very respectable figure, and is better than that of its rivals. But the average value of each order is down and the firm is still making losses.

He added: “And the question marks over its business model refuse to go away. With its sales being squeezed by cut-throat competition from both Tesco and Waitrose, such punitive capital costs may one day overwhelm Ocado.”