Ocado losses widen due to warehouse fire and costs of driver shortage

For the 13 weeks to August 29 Ocado reported a 10.6% fall in revenues to £516m due to a fire at its Erith distribution centre in south east London.  

Chief executive Tim Steiner said the fire would lead to a £10m loss, and warned the retailer would incur a further £5m in costs for hiring and paying delivery drivers amid a national shortage.

The blaze at the Erith facility, caused by the collision of three robots, was the third suffered by the retailer in three years and resulted in 300,000 orders, or £35m in sales, being lost. 

Ocado said the business disruption cost it £10m, plus another £10m for stock and other write-offs. The resulting net cost, not covered by insurance, is estimated to be £10m, which will drag down profits for the current year.

Despite the quarter being marred by yet another fire, Steiner said the roll-out of a new generation of robot pickers and fixes to older robots meant the situation wouldn’t occur again. 

“There was a massive difference between the [Andover and Erith] fires. We obviously learned a lot from Andover and, together with our insurer who were the main advisers on design and construction and this type of measures to eliminate these types of fires.

“As a result the fire at Erith was very contained and did a limited amount of damage. We’re making some physical changes to the robots to eliminate the potential for a similar event to occur.”

Steiner also said Ocado’s international partners were “very reassured” by the work it was doing on its robot designs, adding the retailer’s Solutions arm had stopped shipping old robot designs to customers this year following the fire at Andover. 

He added: “This way this latest fire started was only possible with the old robots. With the new robots, nothing would have happened.” 

Revenues for the period were down 1.8% in the first six weeks of the quarter, due to strong year-on-year comparisons and the opening up of wider food and hospitality. This worsened to a 19% slump in the subsequent seven weeks of the quarter, due to the fire. 

To compensate for lost capacity from the Erith blaze, Ocado said it ramped up warehouse capacity at Purfleet in Essex and Andover in Hampshire, with the latter processing 20,000 orders a week. 

The pureplay grocer estimated its Erith distribution centre would be running at maximum capacity again by November, in time for the busy run-up to Christmas. 

In a bid to address the ongoing HGV driver shortage, Steiner joined his voice to the chorus of grocery chief executives calling for drivers to be granted skilled work visas to ease the crisis. 

While he said Ocado’s Christmas preparations wouldn’t be directly affected, as it was “always oversubscribed” for deliveries during the period, he said, “We do need as a country to address the shortage.”