Ocado toasts its first ever annual profit as it lowers marketing spend

Ocado made a pre-tax profit of £7.2m in the year ending 30 November 2014 – its first annual profit since it was formed in 2000 – while lowering overall marketing spend by 1%.

The online grocer, much like the big four supermarkets, has struggled to make a profit out of online. It reported a £12.5m loss in pre-tax profits for 2013.

It said, however, that deals with Waitrose and Morrisons were ‘starting to pay off’ as total sales also increased by 19.8% to £948m for the full-year period.

Ocado said that active customers increased to 453,000 in comparison to 385,000 in 2013, something achieved despite ‘lower growth in overall marketing spend’. It lowered marketing spend year-on-year by 1% (to £10m).

It also said the launch of second non-food website Sizzle, which sells homeware, and petcare offering Fetch both “grew brand awareness despite limited marketing support” over the year.

Chief executive Tim Steiner says he is confident ‘consumers are abandoning the weekly shop’ in favour of online services and believes that after its positive 2014 performance Ocado will continue to grow in 2015.

“While the broader grocery market was characterised by intense competition with minimal growth in the segment, declining supermarket store sales, competitive price activity and cautious consumer spending,” said Steiner. “We continued to grow ahead of the online grocery market and significantly ahead of the market overall.”

Today’s positive full-year results could be a result of the online grocer upping its marketing spend for the second half of 2014.

Steiner also talked up the success of Morrisons.com. Having delivered online groceries for Waitrose since its conception, Ocado launched a separate partnership with Morrisons in January 2014 – the big four retailer’s first move into online retail.

“The successful launch and smooth ramp up of Morrisons.com was particularly encouraging and paves the way for future agreements to commercialise the value of our intellectual property,” he added.

The fortunes of Ocado come as the big-four supermarkets continue to lose market share and sales to discount rivals such as Aldi and Lidl.

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