Times are tough for supermarkets
Online grocer Ocado’s profits have 5.7% to £40.4m for the six months to 15 May, against 11.4% growth a year earlier.
Ocado’s shares dropped to a three-year low earlier this month following Amazon’s online grocer market AmazonFresh debuting in the UK.
“We are pleased with the steady progress in our business, maintaining double-digit sales growth in a retail environment that remains challenging,” chief executive Tim Steiner said.
“Notwithstanding the tough nature of the marketplace, we expect to continue growing ahead of the online grocery market.”
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John Ibbotson, director of the retail consultancy Retail Vision, said:
“The launch of AmazonFresh earlier this month caused Ocado’s share price to slump to a three-year low, and led many to predict imminent doom for the brand.
“But the obituaries are still looking premature. Or at least they face a few more drafts, as the Ocado fairytale still has a few more chapters left to run.
“Both sales and volumes are up by a solid amount on this time last year, which in the current environment is no mean feat.
“But Ocado’s search for an international partner has still proved fruitless. Rumours of a tie-up with a big name brand like Carrefour or Safeway have come to naught.
“And herein lies the weakness at Ocado’s heart. Its technology is second-to-none, but its revenues from selling groceries aren’t growing nearly fast enough to recoup its astronomical set-up costs.
“Now it’s spending more on a major delivery centre in Hampshire, and adding to its debt pile even further.
“While there is a place in the market for Ocado’s high-end grocery offering, AmazonFresh will inevitably suck away customers in its core London market.
“But Ocado’s greatest asset is its technology, and it needs to find a buyer for it fast.
“Ocado has always been a schizophrenic company – part grocery retailer, part technology firm – and this internal conflict will soon become untenable.
“It is just about holding its own against the Big Four supermarkets, but with cripplingly high costs and a growing debt mountain, its future as an online grocer is far from assured.
“It must use its technology to woo a giant retail prince if the fairytale is to have a happy ending.”
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