Ocado today reported full-year gross sales rose 17.2% to £843m last year, when pre-tax losses widened to £12.5m and that co-founder Jason Gissing is to retire. Retail Week rounds up analysts’ reaction.
“We believe Ocado satisfactorily addressed numerous issues; the share of costs in the Morrison deal, own label growth, customer penetration, different Return on Capital Employed levels on in-house pick systems, use of plastic bags etc but the over-riding factor for us has been the improvement in the business model.
“CFC2 could produce a 10% increase in EBITDA margin on £600m of sales on £120m of capital, in our view, so implying a two year pay back, a return only achieved on the best inner city convenience stores.” – Mike Dennis, Cantor Fitzgerald
“The results provide evidence of continued operational improvement at Ocado and the EBITDA margin improvement should be taken positively. We view the slightly weaker than expected development of underlying EPS as immaterial in the context of the company’s longer-term opportunities.” - Franklin Walding, Goldman Sachs
“2013 was a transformational year for Ocado, in which it opened CFC2 on time and on budget, successfully launched its first strategic partnership, and saw sales growth accelerate ahead of the market. We continue to see huge long-term potential for Ocado to leverage its IP to support Ocado Retail and develop international partnerships.” – Andy Wade, Numis
“The retirement of co-founder Jason Gissing, the scourge of Waitrose, is a surprise, but he hasn’t been actively involved in the business for a while, although Tim Steiner and Stuart Rose pay him fulsome tribute.
“All the focus today should be on the success so far of the tie-up with Morrisons, the prospects for a third Ocado warehouse and an update on the hopes for a lucrative tie-up with an Overseas supermarket chain, but… Ocado say nothing about all that, with the statement focused on the “unstoppable” momentum in Online grocery shopping and their own brilliance. And the statement that “In 2014, we expect to grow broadly in line with, or slightly ahead of, the market” seems a bit subdued.” – Nick Bubb, independent
“Following a rosy festive update, these full year results again show a retailer sitting well with the structural shift to online grocery shopping, with sales growth noticeably above that of the web division of market leader, Tesco. However, with pre-tax losses having increased to £12.5m, the issue of profitability once again casts a long shadow, even as Ocado’s sales continue to increase.
“Meanwhile its Price Promise ensures it remains competitive with the Big Four; indeed, Ocado is well positioned in a polarised market, where discounters such as Aldi and Lidl are thriving at one end, while more premium players such as M&S, Waitrose and Ocado itself are also enjoying healthy gains, as consumers selectively trade up.
“The challenge for Ocado is whether it can continue taking share to the extent required to take it past the profitability threshold. To succeed it needs to continuously outstrip the Big Four and, as the likes of Tesco and Asda seek a resurgence, Ocado will find its own comparatives harder to match.” – George Scott, Conlumino
Ocado co-founder Gissing retires as full-year losses widen
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Ocado’s full-year results: What the analysts say