Ocado shares down 9% as losses double

Ocado described 2022 as “a challenging year” as losses more than doubled to £500.1 million (from £176.9 million in 2021) - worse than analyst forecasts.

Group revenues at the online groceries retailer rose by just 0.6% to £2.5 billion as retail sales fell by 3.8% to £2.2 billion. However, international solutions sales increased by 122% to £66.6 million, while UK solutions and logistics revenues rose by 13% to £802.7 million.

Shares fell by 9% on the day of results. Ocado shares have declined by 60% in the past 12 months to 535p.

Ocado CEO more confident in model 'than ever before'

However, chief executive Tim Steiner says he continues to believe in the business. “Over the last year every company has had its business model tested by a combination of macro-economic and geopolitical headwinds, and I am pleased that, thanks to the creativity and commitment of my colleagues, we have more confidence in our model than ever before,” Steiner told investors.

“Ocado Retail, our UK JV with M&S, has shown its resilience against a backdrop of higher costs and smaller baskets, reflecting the Covid unwind and the UK cost of living crisis, by growing customer numbers and increasing online market share. As the Covid unwind fades and customer growth continues the business will start to recover the fixed costs of recent capacity commitments.”

Steiner says the company has rolled out its customer fulfilment centres “at an unprecedented pace” for its Ocado solutions customers, who have seen “industry-beating e-commerce growth in key markets.” He says the new business pipeline is solid, signing Auchan Polska in Poland and Lotte in South Korea last year, while new centres will open with partners in Japan and Australia this year.

Ocado says it is ‘well-financed’ since fundraising

Despite the poor results, the company says that since its fundraising in June it is well-financed with £1.3 billion in the bank, which should last until it becomes cash-flow positive – expected in four to six years.

Ocado also says that its technology spend is due to reduce in the coming years and its new Ocado Re:Imagined technology will also deliver “better economics” for the company.

Analysts at Shore Capital called the results “awful”. However, those at Peel Hunt reiterated their buy recommendation with a price target of 1,061p.

Ocado has been a perennial disappointment for investors, with the exception of the Covid years. While the shares could be a recovery play, with the cost of living crisis and cash-flow positive still years away, it’s difficult to see what could prove to be a near-term catalyst.

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