Ocado’s profit struggle continues

Despite its impressive infrastructure, online supermarket Ocado is still struggling to make a profit, with the benefits of its recent tie-up with WM Morrisons yet to impact on the underlying figures.

There is much to admire about Ocado and its management: there is a long-term plan with regard to the demographics of the underlying customers and how they will shop, and Ocado has the fortitude and finances to build an infrastructure to cater for this demand.

However, Ocado is still a loss-making company, and is arguably old enough that we can’t refer to it as a startup anymore. Former Marks & Spencer chairman Sir Stuart Rose  is now at the helm and the firm must realise that it needs to convert all the planning into profit, or else they will leave themselves open to being acquired for a fraction of the price that their time, planning, foresight and effort should reward.

The figures demonstrate why Ocado claims to be the market leader in the home delivery service, with 94.4% orders delivered on time or early and 98.9% order accuracy. Ocado is currently running at weekly orders of 139,000, up 13.4% from 2012 at an average order cost of £114.90.

Even with the £26 million cost of bringing both distribution centres up to speed, the company has a healthy £63 million cash or cash equivalent available and will not need to refinance any time soon. The year-end numbers will be keenly anticipated, with a hope that the Morrisons agreement will finally translate in bulk orders to go with a successful delivery system.

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