Ocado shrinks losses by growing product lines

Extending product ranges, including its own-label brand, has helped Ocado to drive down its pre-tax losses by £1.8m in the last year.

The online food retailer revealed the news in its latest preliminary results for the 53 weeks to 2 December 2012, reporting a 13.4% increase in revenue to £678.6m and reducing pre-tax losses from £2.4m in 2011 to £600,000.

The firm said that, during the period, it managed to extend its range by more than 40% to over 28,000 products, which it claims is wider than any supermarket.

In addition, Ocado stated it had focused on adding speciality lines, including the largest free-from range in a supermarket consisting of almost 800 lines.

Tim Steiner, chief executive of Ocado, said: “We continued to achieve double-digit sales growth during 2012, with increasing rates of sales and new customer momentum as we moved into 2013. This has been driven by further improvements to our core offer to customers - better value, wider ranges and enhanced service.

“Shopping online for groceries is clearly of increasing importance to consumers. In 2013, we will continue to improve the attractiveness of Ocado to customers and we shall substantially increase our capacity with the opening of our second fulfillment centre, creating over 1,000 jobs in the Midlands.”

Duncan Tatton-Brown, chief financial officer, said: “We have ended 2012 with a solid financial platform and a cash position of £89.6m. We have worked hard at improving overall efficiency in our operations and margins are improving.

“The introduction of a significant increase in fulfillment capacity this year to meet growing demand, and our continued efforts to drive efficiency, will enable us to demonstrate the longer-term benefits of our business model.”

Commenting on Ocado’s latest financial performance, analysts at Shore Capital said:“We doubt Ocado will be especially acquisitive, although a strategy of bolt-on activity may come through in due course. Rather, we expect the heart of the debate to be whether Ocado’s bespoke technology and market position will be sufficient for the forthcoming chairman to engineer a premium takeover?

“On this potential outcome we have our doubts. We struggle to see what Ocado brings to a UK or international suitor from capability, earnings enhancement or capital returns perspectives. We see a business that is possibly materially over-engineered and increasingly less right for its time.”

Regarding the company’s outlook for the future, Ocado concluded: “Against a tough economic environment, we continue to see that shopping online for groceries is of increasing importance for consumers, evidenced by the online growth figures reported across the grocery industry. 

“We believe we are well-positioned to benefit from this continuing growth in online demand with our market-leading offer to customers, and unconstrained by the concerns of cannibalisation of existing stores. It is our mission to continue to provide a shopping proposition that offers far more than a traditional supermarket, in terms of convenience, usability, service, range and price. Our focus and business model position us strongly to drive growth and profitability in the future.”