Ocado Retail plans to return to “marginal” profitability in 2023 despite expected first-half losses
- M&S joint venture expects ‘slightly positive’ 2023 results
- It recorded a loss of £4million last year, while Ocado Group losses topped £500million.
Ocado Group and delivery joint venture Marks & Spencer Ocado Retail have recommitted to a return to profitability in 2023.
The company expects to post “mildly positive” profits in 2023, compared to a loss of £4m in the year to February 28, reflecting “single-digit” revenue growth with a ” improving trajectory” and a return to growth in the volume of the basket.
But Ocado Retail also expects to see losses in the first half of the year before improving later “as a return to volume growth supports better capacity utilization and lower costs relative to sales” .
Ocado Group shares fell around 6% to 425.3p as of midday on Tuesday, while M&S shares added 1.4% to 157.2p.
Keep trucking up: Ocado Retail expects to return to profit after losing £4m last year
Hannah Gibson, chief executive of Ocado Retail, said the group continued to attract more customers “by investing in great value”.
Ocado Retail’s active customers increased 13.8% year-on-year to 951,000 at the end of the group’s first quarter, while average selling prices rose 8.3%.
Revenue in the 13 weeks to February 26 was £584m, up from £565m in the same period last year, as average orders per week rose 3.6%.
But the group’s average basket value remained stable over the period, with the average number of items purchased falling 7.5% to 45.
Ocado Retail also reported improved service levels, with on-time delivery and order accuracy now back to pre-pandemic levels.
Gibson added: “While the business environment remains challenging, we expect to build momentum in the second half of the year as we improve our proposition, expand our customer base and no longer overlap the buying behaviors of This solid performance in 2023 will enable us to return to sales growth and profitability.
Ocado becomes the target of short sellers
Ocado Group has recently become one of the biggest targets of London-listed short sellers after posting a pre-tax loss of £500.8m for 2022, around £100m more than analysts believe. were planning.
Over the past two years, the company’s shares have also lost more than 80% of their value as the Covid-induced boom in digital grocery shopping has lost steam.
Mark Crouch, analyst at eToro, said: “Ocado Retail is making decent progress in attracting new customers, but it’s clear that people are starting to tighten their belts in the face of rising prices.”
“So it’s clear that even Ocado customers, who tend to be wealthier, are starting to feel the daily financial pressures that come with rising inflation.
“With the overall inflation picture expected to improve as we enter the second half of the year, it will be interesting to see if basket values and volumes pick up. We suspect they will. could.
Julie Palmer, partner at Begbies Traynor, added: ‘Ocado is trying to overturn the perception that it’s an overpriced option in these difficult times with the launch of a price matching system compared to Tesco, but pushing through the message turns out to be hard work.
“Although revenue and customer numbers increased slightly in the first quarter, the pressure on buyers showed itself in the average value of each order which remained stable, while the number of items in each delivery fell. , pointing out that the price tags of individual items are increasing rapidly.
“Ocado customers are spending the same amount to buy less – not a good place for a business to be in a hyper-competitive market with cash-strapped buyers where Ocado is seen as the best option. more expensive.”
