Ocado has warned that its international expansion plans will hurt profits next year, hitting shares in the online grocer that are now more than 50 per cent below their pandemic peak.
The UK company, which has also been battling labour shortages, will invest £30mn more than analysts expected in its international technology business, chief financial officer Stephen Daintith said on Tuesday.
Daintith said the investment will shave the same amount off Ocado’s earnings before interest, tax depreciation and amortisation this year, which analysts had forecast would be £92mn.
Repeated lockdowns in the UK turned Ocado into one of the winners from the pandemic as shoppers were forced online. Chief executive Tim Steiner, a former bond trader and the retailer’s co-founder, said last year that the coronavirus crisis had changed the grocery market for good.
After peaking in September 2020, and then rallying again during the UK’s second major lockdown last January, Ocado shares have fallen steadily. They were down 10 per cent in morning trading on Tuesday, extending their drop for the year to 20 per cent.
The group, which has technology partnerships with retailers including Kroger in the US and Sobeys in Canada, has previously warned that investment in its technology and warehouses will be a drag on profits.
Its earnings before interest, tax, depreciation and amortisation for the 12 months to the end of November dropped to £61mn from £73mn, matching analysts’ expectations, as the company ploughed money into five new warehouses as well as its technology.
However, on a pre-tax level, the group reported a loss of £176.9mn compared with a loss of £52.3mn in 2020.
The retailer continued to benefit last year as shoppers stayed online, but a tight labour market in the UK, combined with a fire at one of its centres in east London, restricted growth.
Revenues at Ocado Retail, the joint venture it runs with Marks and Spencer, rose 5 per cent to £2.3bn in the 12 months, while group revenues climbed 7 per cent to £2.5bn.
Steiner said on Tuesday that “the past year has further reinforced that demand for online grocery is here to stay.”
In January, Ocado unveiled lighter robots for its automated warehouses, which are designed to fulfil orders more quickly, in a bid to compete with rapid delivery start-ups, such as Getir, and cut staffing costs.