Ocado sales cross £2bn as COVID-19 drives online grocery boom

Oscar Williams-Grut
·Senior City Correspondent, Yahoo Finance UK
·3 min read
LONDON, UNITED KINGDOM - 2020/11/27: An Ocado delivery van in London. (Photo by Dinendra Haria/SOPA Images/LightRocket via Getty Images)
An Ocado delivery van in London. Photo: Dinendra Haria/SOPA Images/LightRocket via Getty Images

Online supermarket Ocado (OCDO.L) saw its sales cross £2bn ($2.75bn) last year as the COVID-19 pandemic drove a global boom in online shopping.

Ocado said on Tuesday that its retail sales rose by 35% to £2.2bn in 2020. It came as the overall online grocery sector doubled to 14% of the market, according to data from market research firm Kantar.

“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,” Ocado chief executive Tim Steiner said in a statement. “The landscape for food retailing is changing, for good.”

The growth of online grocery helped support Ocado’s services businesses, which sells its warehouse and picking technology to other retailers around the world. Invoiced fees at Ocado’s international solutions business rose by 52% to £123.9m and revenue at its UK logistics and services arm rose 13.6% to £654.3m.

“We believe strongly that our platform will help our partners deliver a market-leading service to their customers, as the very promising initial results from our partners Groupe Casino and Sobeys have shown,” Steiner said.

Overall, group revenue rose by 32.7% to £2.3bn in the 52 weeks to 29 November 2020. Underlying earnings rose 68.8% to £73.1m.

However, exceptional costs of £104.6m pushed Ocado to a full-year loss of £44m. The figure was down on 2019’s loss of £214.5m.

The results were broadly in-line with City forecasts. Shares fell 3.5% in early trade in London. The stock has rallied by around 30% since December.

Shares in Ocado slumped at the open in London. Photo: Yahoo Finance UK
Shares in Ocado slumped at the open in London. Photo: Yahoo Finance UK

“These are remarkable results,” said Ross Hindle, an analyst at investment research provider Third Bridge. “The stellar Ocado full year results reflect the boom we’ve been seeing in online grocery and e-commerce during 2020.

“The question now is how much of that growth will stick, and how much will slip away as lockdowns ease. Experts believe Ocado’s upper-end niche market placement is likely to shield them from this pullback effect more than its big four competitors.”

Ocado, which has a partnership with Marks & Spencer (MKS.L), said its 2021 performance would be “highly dependent on length of Covid-19 restrictions” but predicted strong revenue growth. The company plans to open three new high-tech warehouses in the year ahead and expects to spend £700m on its business.

“Going forward, customers who have experienced the benefits of online grocery shopping are likely to become ever more discerning,” Steiner said. “Winners in the online channel will need to offer the very highest standards of customer service and the ability to serve a full range of customer missions.

“These include the full family basket as well as the convenience shop, the option of direct to home or pick up at the store, the same day or next day.”

Ocado is facing a legal battle with Norwegian company Autostore over some of the intellectual property used in Ocado robotics. Ocado said it didn’t see any merit in the claims and would fight the cases in the US and UK.

“It is very difficult to predict litigation costs, but we expect to incur significantly more legal costs than in 2020,” the company said.

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