Ocado defies analysts and posts first profit
February 3, 2011
Online supermarket retailer Ocado Plc defied recent profit forecasts posting its first quarterly profit.
The grocer also said it would begin to rival heavyweights like Tesco and others more aggressively by stepping up its campaign to offer cheaper, more accessible groceries. Shares in the group rose sharply with the announcement, following a slump after its initial public offering in July.
On Tuesday, shares in Ocado rose more than nine per cent as a renewed faith in the grocer was restored along with its first profit announcement. Chief executive of the firm, Tim Steiner said that more branded goods would be added to its online stocks and own-label ranges would be priced more competitively. Currently, high street retailer Waitrose provides the majority of the grocer’s products.
Steiner said in a statement that the group would like to increase its product offerings to 30,000 to 40,000 items and that this could be accomplished in the next 24 months. He also said Ocado would continue to show strong growth despite tough trading conditions.
As mobile applications and smartphones make shopping online more convenient, Steiner said online grocery shopping would be on the rise as well. Currently, the group offers around 21,500 products.
Year-on-year online grocery sales have jumped 15 per cent, but still only account for around three to four billion pounds of the 150-billion pound industry. Analysts have questioned the profitability of the online grocery sector as retailers like Ocado take 10 years or more to reach profits.
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