Shares in Ocado jumped by as much as 18% after the UK online grocer reported narrowing losses and raised its annual guidance for its technology arm, which sells warehouse robots to other retailers around the world.
Technology revenues climbed by nearly 22% year on year in the six months to 2 June, while retail revenues were also up by 11%. Ocado sells groceries in the UK through its joint venture with Marks & Spencer and was the fastest-growing grocer for the fifth month in a row based on recent sales figures, according to the data analytics company Kantar.
Ocado now expects its tech division to achieve a “mid-teens” Ebitda (earnings before interest, tax, depreciation and amortisation) margin this year, up from previous guidance of more than 10%. The company’s overall pre-tax loss in the first half of the year narrowed to £154m, from £290m a year earlier.
This reassured investors, and drove Ocado shares sharply higher. The stock closed up 8% at 368.1p but hit 409.1p earlier in the day.
The share price has lost 47% this year amid concerns that some clients, such as the Canadian supermarket Sobeys and Kroger in the US, are pausing the rollout of robotic warehouses.
Tim Steiner, Ocado’s chief executive, explained that clients had based their plans on trends seen during the Covid pandemic when online shopping surged – but then fell back as shops reopened. He said the global shift to online shopping had resumed and brushed off investor concerns, saying: “We expect to see a lot of long-term growth.”
With grocery inflation slowing sharply from last year’s double-digit increases, consumer sentiment has been rising. Steiner said: “It’s definitely improved. Consumers are in a better position than they were this time about a year ago, when it felt like everything was constantly moving up at crazy levels, other than people’s incomes.”
He noted that grocery inflation is now running at 1.6%, according to Kantar, below average wage rises. But he added: “Obviously consumers are still feeling the pinch.”
Commenting on whether Ocado would keep its stock market listing in the UK, he said: “The London market can be tough for some companies. Obviously, we’ve got a very strong retail presence here in the UK with Ocado Retail, it’s a natural place for that business to be listed.
“In the long-term future as a global tech company, could you consider other markets? You could but we’re actually really focused at the moment on serving our clients well … And those efforts are really where we’re focusing our time and not on where we’re listed.”
Steiner reckons that there is still demand for Ocado’s fast-delivery service Zoom, despite the demise of rivals such as Getir and Gorillas. He said: “I do think that there is demand for ultra-fast services.”
