Online grocer Ocado has promised to focus on value, range and quality after it reported its first pre-tax profit of £300,000 in its fourth quarter.
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Ocado’s maiden prelims as a public company showed pre-tax losses for the year to November 28 fell 52% to £12.2m, including £3.5m of one-off IPO costs. Its operating loss was cut by 63% to £5.4m.
Gross sales were up 29% to £551.1m, and adjusted EBITDA rocketed 138% to £22m. Net sales advanced 28% to £515.7m.
Ocado chief executive Tim Steiner said the grocer would keep up momentum by “focusing on keeping prices competitive, great quality, and value to ensure we keep winning customers”.
During the year Ocado expanded its range by 1,000 to 21,500 SKUs, and it now has 250 own-label products. Steiner hopes to up the number of own-label products to between 500 and 1,000 within a year.
Ocado has also increased the number of items covered by its Tesco Price Match guarantee to 7,200.
Steiner aims to increase the grocery range to between 30,000 and 40,000 SKUs in two years. He said: “We want to be able to offer the largest range of groceries of all the supermarkets. When we hit this target we believe this will be a larger range than any Tesco or Sainsbury’s branch.”
Ocado’s shares have been on a roller-coaster ride since the etailer made its stock market debut in July last year, as many brokers questioned whether its model could work. In recent weeks its shares have shot up on the back of speculation about a takeover deal or investor stakebuilding.
Ocado chief financial officer Andrew Bracey said: “We’re pleased to have delivered a pre-tax profit ahead of expectations as some were sceptical the model would work.”
Jefferies analyst James Grzinic said the results showed “Ocado clearly out-trading the wider grocery internet market and delivering reassuring margin leverage”.
However, Altium analyst Philip Dorgan said the results “are irrelevant to the valuation argument”.
He said: “We have set out our stall with the bears because we don’t believe that Ocado is capable of generating superior returns and we think that a trade buyer would struggle to change the economics of a warehouse-picking model.”
According to food industry body IGD, the online grocery market is likely to nearly double in value to £9.5bn by 2015.
Steiner maintained: “There is plenty of growth for everyone in the market”.