Ocado hails Amazon US Whole Foods swoop

Amazon package. Photo credit: Paul Faith/PA Wire
Amazon package. Photo credit: Paul Faith/PA Wire
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Online grocer Ocado has hailed Amazon’s recent swoop on US chain Whole Foods as a “positive catalyst” for its international deals as it posted lower half-year profits.

The group said pre-tax profits tumbled 18.1 per cent on a 26-week comparable basis to £7.7m in the six months to May 28 as the costs of opening a new distribution centre offset a 12.5 per cent rise in revenues.

Ocado, which recently struck its long-awaited first international deal, said it believed Amazon’s £10.6bn takeover of Whole Foods would help it secure further overseas partnerships.

The group saw shares race higher last month after Amazon’s deal was announced on hopes it would increase the chances of the online titan and Ocado working together in the future.

Ocado chief executive Tim Steiner said: “We continue to progress conversations with multiple retailers internationally to use the Ocado Smart Platform and believe that recent industry developments such as the announced acquisition of Whole Foods by Amazon will be a positive catalyst in advancing these discussions.”

Mr Steiner said he hopes the recent agreement signed with a regional European retailer would be the “first of many”.

He added: “Grocery retailing is changing and we are ideally positioned to enable other retailers to achieve their online aspirations.”

Ocado had been under pressure over its delay in striking a deal, missing a self-imposed deadline of the end of 2015 to expand overseas, and short-selling of the stock increased as investors grew increasingly sceptical over the retailer’s strategy.

But the FTSE 250 group saw its stock bounce back after it announced a partnership in early June, although it said the customer wanted to remain anonymous.

It also signed a five-year deal in May to service online sales for Dobbies Garden Centres.

Ocado already has partnerships with Waitrose and Morrisons.

In its half-year results, Ocado confirmed the “return of modest inflation” after years of falling food prices, although it said the market remained competitive despite pressure from the Brexit-hit pound.

But its average basket size still fell, down 1.4 per cent to £108.45 as customers bought fewer items, preferring to shop more frequently, while it also axed multi-buy promotions and saw further take-up of its Smart Pass membership scheme.

Mr Steiner said: “After several years of price deflation in the UK, we have seen this begin to ease in the period and, when combined with our increasing scale and operational efficiencies, this trend will support the continued profitable growth of our retail business.”

Half-year retail revenues lifted to £659.6m from £586.2m, on a comparable 26-week basis.

Profits were impacted by the opening of its new distribution centre in Andover, as well as further investment in its platform.

On an underlying basis, earnings lifted 2.7 per cent to £45.2m on a comparable 26-week basis.