Ocado shares were falling on Tuesday after the premium online food retailer said that although revenue had marginally increased, higher costs caused a swing to an EBITDA loss.
Ocado’s 2022 revenue rose 0.6% to £2,513.8m but increasing costs saw EBITDA swing to a £74.1m loss. The cost of living crisis meant customer average basket value fell while active customer numbers grew 13% to 940,000.
“Ocado Retail has seen losses mushroom. Despite a 13% increase in active customers, volumes haven’t followed suit, meaning the cost to serve all those online orders has become a burden,” said Sophie Lund-Yates, Lead Equity Analyst at Hargreaves Lansdown
“Ocado is in the eye of the cost-of-living storm because its offering isn’t synonymous with being the best value, it’s a higher-end option, without the same benefits of enticing people in with tangible, physical goods like M&S or Waitrose can.”
“One quarter of British shoppers are struggling as grocery price inflation goes above 17% for the first time, according to new data from Kantar. It was a year ago that food inflation climbed above 4%, meaning consumers now feel like there’s a hole in their wallet every time they reach the checkout.”
Ocado’s retail business revenue was £2,203m in 2022, a 3.8% reduction from 2021’s £2,289m.
Ocado Costs
Growth in Ocado’s solutions business propped up revenue as their international solution business revenue 122% grew to £148m, but the revenue increase failed to add any meaningful impact to EBITDA. This accentuated the increase in administration and distribution costs that was responsible for the swing to a group EBITDA loss.
The group continue to win new Customer Fulfilment Centre (CFC) contracts and now has 23 sites live with a further 6 expected to come online in 2023.
Ocado signed two new Ocado Smart Platform contracts in 2022 to bring the total to 12 partners.
Despite the progress in the solution business, Ocado said they expect it will take 4-6 years for the group to become cashflow positive.
Ocado shares were trading down 9% to 567p at the time of writing on Tuesday.