Ocado losses soar amid rising costs as squeezed customers cut back spending
The online supermarket company also missed expectations when it reported its financial results as its losses soared almost threefold. The amount that each customer spent per shop in the company’s supermarket arm fell from £129 in 2021 to £118 last year.
It is unclear how much of this is due to the cost of living crisis and how much is caused by a return to more traditional shopping patterns after the pandemic. Average shopping basket sizes and how much a customer spent per shop soared during the pandemic. In 2019 average basket values were £106. Customers bought on average 46 items per visit to the supermarket’s online store last year, down from 52 the year before but the same as before the pandemic. The company’s costs have soared, putting pressure on the loss, which went from £177m in 2021 to £501m last year. However, chief executive Tim Steiner said he had never been more confident in the company’s business plans.
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Hide Ad“Over the last year every company has had its business model tested by a combination of macro-economic and geopolitical headwinds, and I am pleased that, thanks to the creativity and commitment of my colleagues, we have more confidence in our model than ever before,” he said.
He added: “Ocado Retail, our UK joint venture with M&S, has shown its resilience against a backdrop of higher costs and smaller baskets, reflecting the Covid unwind and the UK cost-of-living crisis, by growing customer numbers and increasing online market share. As the Covid unwind fades and customer growth continues the business will start to recover the fixed costs of recent capacity commitments.”
Revenue was a little over £2.5bn, up 0.6 per cent compared to the year before and slightly lower than analysts had expected.
Richard Hunter, Head of Markets at interactive investor, commented “Ocado is caught between a rock and a hard place, as the two elements of its business continue to face different tests. The Solutions business, on which most of the group’s hopes for future growth and profitability is pinned, has yet to deliver on a sufficient scale to appease investors. The promises of large-scale adoption for its cutting-edge technology has yet to fully materialise, after some considerable time, which has led to investors shunning the stock in their droves."