Online shopping boom sends Ocado's earnings soaring by a third to £2.2billion

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Online shopping boom sends Ocado's earnings soaring by a third to £2.2billion

Online shopping boom sends Ocado's earnings soaring: Sales at grocery retailer rise by a third to £2.2billion as demand for home deliv

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Online shopping boom sends Ocado’s earnings soaring: Sales at grocery retailer rise by a third to £2.2billion as demand for home deliveries rockets during pandemic

  • Online grocer reported group earnings of £73.1million for year to November 29 
  • Earnings in its retail arm, joint venture with M&S, more than trebled to £148.5M 
  •  Chief executive said: ‘The landscape for food retailing is changing, for good’

Ocado’s sales has risen by a third to £2.2billion as the grocery retailer says shopping habits have changed for good because online food shops rocketed during the pandemic.   

The online grocer reported underlying group earnings of £73.1million for the year to November 29, up from £43.3million the previous year, as revenues rose by 35% to £2.2billion.

Earnings in its retail arm, a joint venture with Marks & Spencer, more than trebled to £148.5million, up from £40.6million the previous year.

It narrowed pre-tax losses to £44million from £214.5million as the online shopping boom helped offset heavy investment.

The online grocer reported underlying group earnings of £73.1million for the year to November 29, up from £43.3million the previous year, as revenues rose a third to £2.3billion

Chief executive Tim Steiner said: ‘The rapid acceleration of many pre-existing trends in business and society has been a feature of the Covid-19 crisis and the dramatic channel shift in grocery is a clear example of this.

‘The landscape for food retailing is changing, for good.’

He dismissed calls for an online sales tax following Tesco’s plea for the Chancellor to introduce a 1 per cent levy for internet competitors as ‘wholly inappropriate’.

Mr Steiner said: ‘I don’t think it’s appropriate for anyone to put a sales tax on a retailer because they operate from different premises or are an efficient operator.’

Earnings in its retail arm, a joint venture with Marks & Spencer, more than trebled to £148.5million, up from £40.6million the previous year, on sales up 35.3 per cent

Earnings in its retail arm, a joint venture with Marks & Spencer, more than trebled to £148.5million, up from £40.6million the previous year, on sales up 35.3 per cent

On calls for a windfall tax for those sectors that have benefited amid the pandemic, he added: ‘People who make profits generate taxes.’

Ocado pledged to invest an extra £30million in technology to meet the surging demand during the pandemic and said it is hiring another 600 staff in its IT division, after taking on 500 in 2019-20.

But it warned that retail sales growth over the current year is dependent on Covid-19 restrictions as it said the pandemic will continue to have a ‘significant impact on group performance’.

It said the planned opening of three new high-tech warehouses will support greater availability of delivery slots for customers while it is also set to ramp up the rollout of its new Zoom rapid same-day service within London and inside the M25.

The group’s first Zoom site is full, with a second secured and it is on the lookout for another 12.

Chief executive Tim Steiner said: ‘The rapid acceleration of many pre-existing trends in business and society has been a feature of the Covid-19 crisis and the dramatic channel shift in grocery is a clear example of this. The landscape for food retailing is changing, for good’

Ocado’s results showed that its average basket value jumped to £137 from £106 due to the surge in demand.

The figures also revealed that its UK solutions and logistics division, which provides services to the Ocado and M&S joint venture, alongside a contract with Morrisons, saw underlying profits fall 38.4 per cent to £44.4million.

But sales at the division rose by 13.6 per cent over the year.

The firm added that legal costs are expected to be significantly higher this financial year due to a lawsuit filed by Norwegian technology and robotics manufacturing company AutoStore against Ocado over alleged patent infringement.

Ocado said: ‘Having analysed the claims, we remain of the view that we do not infringe any valid AutoStore rights.’

Shares fell three per cent despite the earnings boost.

John Moore, senior investment manager at Brewin Dolphin, said: ‘Ocado has redoubled its commitment to heavily invest in its offering, seeking faster growth through new capacity and technology innovation – while this is yet to translate into profit, it places the business very well for the future.’

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