Mixed results this week from online supermarket Ocado which saw their profits fall in the first six months of the year by 9.4% to £7.7 million . However, order volumes grew by 15.6% to an average of 260,000 orders per week although the average basket size fell by 1.4% to £108.45 which the company put down to promotions. Good news was the number of active customers using the service jumping nearly 13% to over 600,000. The release of these mid year figures saw Ocado’s share price increased by 1.24% to 293.2p in morning trading. Chief executive of Ocado was overall pleased with the results and saw them as a great foundation from which to meet the challenges of the future.
“After several years of price deflation in the UK, we have seen this begin to ease in the period and, when combined with our increasing scale and operational efficiencies, this trend will support the continued profitable growth of our retail business.
“As the channel shift to online advances we continue to gain share in a competitive UK market. We expect the trend for grocery shopping online to continue as consumers become more tech savvy and gain confidence in the online services available. Ocado will be a natural beneficiary of that trend thanks to its industry-leading customer offer. We continue to build new facilities in the UK in order to meet the increasing demand we see.
“Grocery retailing is changing and we are ideally positioned to enable other retailers to achieve their online aspirations. We expect our recently announced international partnership to be the first of many and look forward to helping more retailers provide a high quality service to their customers in this rapidly evolving market.”
A Possible Takeover?
However, John Ibbotson, director at retail consultancy Retail Vision said that the future was not guaranteed and that realistically the company needed a take over to help it drive the business forward.
“In tech terms, Ocado is at the front of the grocery starting grid but even then its future is not guaranteed. While it is no mean feat to increase sales in the current environment, basket sizes are declining, profits are down and the debt mountain continues to grow. Ocado needs a retail giant to buy up its tech or take it over, and soon. No wonder shareholders are demanding a shake-up.”
Could this now be on the cards? Following Amazon’s takeover of Whole Foods, it has brought a renewed focus on online grocery shopping in Britain where it accounts for 7.6% of total grocery sales and is growing by 10% a year, with Ocado have a UK grocery market share of 1.3%. Some leading analysts believe that the Amazon takeover of Whole Foods increases the chances of an Amazon takeover of Ocado or an approach from another US grocery chain.