Ocado makes first quarter of profit

The online retailer made a pre-tax profit of £300,000 in the three months to 28 November but a strong final quarter could not offset its £12.2m pre-tax loss for the entire year.

Ocado went public in July last year and £3.5m of the pre-tax loss for the year was attributed to costs related to the initial public offering.

Gross sales for the year increased 29% to £551.1m, delivering on targets set out by Ocado at its flotation, which chief executive officer Tim Steiner says is the result of “improving the customer offer”.

He adds: “The UK online grocery market is still at an early stage of development. We believe the most effective way Ocado can increase adoption is to continue improving our customer offering.”

Its average orders per week increased by 31% to 92,916, boosted by more customers using mobile devices to make their purchases.

However, retail market research firm Verdict’s consulting director Nigel Saunders warns that one quarter of profit and strong sales do not necessarily mean Ocado is on a firm trajectory to continued profit growth.

He says: “There are a whole host of downside risks this year including a more frugal consumer trading away from some of the more expensive goods Ocado sells, Waitrose Deliver moving into Ocado’s core London market and the increased costs of delivery through higher oil and fuel prices.”

Ocado introduced its own-label range in September to complement the Waitrose products it already sells and the company says 64% of all baskets contained an Ocado own-label item in the final four week period of the year. Ocado says it will look to expand its own-label range in the coming years.

In May last year Ocado signed a renewed deal to retain the rights to sell Waitrose goods under its own name and will continue to sell Waitrose products until at least 2020.