Ocado today revealed that it slipped into the red in its first half, posting a pre-tax loss of £3.8m. Retail Week rounds up the reaction from the City.

“Having signed its first partner, Ocado has made a sizeable step toward being a profitable business but the group still has plenty left to do, not least show its latest technology can work as the group expects and that it can get Morrison online relatively painlessly. Accordingly, we expect the near-term story of Ocado will be a little slower. However with a unique business model, we remain of the view that Ocado can help transform food retail as we know it.” - Andrew Gwynn, Exane

“Today’s interims (for the 24 weeks to 19th May) appear to show that the H1 loss at Ocado was worse than the c£2.3m expected, but that was only because of £2.8m of exceptional costs, with the underlying loss only £1m, despite a £3m hike in the depreciation charge. Still, all this is a bit historic and the big interest at the analysts meeting at 9.30am will be in what management say about their relationship with Waitrose and the outlook for the game-changing tie-up with Morrison’s.” – Nick Bubb, independent

“Even with a retailer (i.e. Waitrose) that has one of the most fulsome gross margins and largest basket sizes in the market, Ocado struggles to make a meaningful and, we assert, satisfactory return. In that respect we return to the question as to how and why Morrison should deliver a profitable venture seeking to supply the south and east of England from the Midlands with a materially lower gross margin and probably a much smaller basket size?” – Clive Black, Shore Capital

“Despite its popularity, there remain doubts about how the Ocado brand would stand alone should Waitrose scrap the deal and withdraw its products. Finally, there are also question marks over how much any company (such as Amazon or Boots) would pay for technology which is yet to prove that it can deliver profitability. It would seem partnerships are the way forward for Ocado but, despite its improvements, large investors are still unlikely to see the value of paying a premium for the privilege.” - Matt Piner, Conlumino

“Today’s 1H results were very much in-line with expectations, both for sales and profitability. Of course, the core Ocado grocery business is now seen as less important than the potential for deals such as that done with Morrison - and on that front there appears to be quite limited new news today. The circular relating to the Morrison deal is due to be issued later today - which will fix a shareholder meeting for 18 July and - assuming shareholder approval - would mean that Morrison would be immediately liable for half of the fixed costs of CFC2. The timing is perhaps slightly earlier than expected and in that sense is a small positive for Ocado. Overall we consider that Ocado’s tone on the consumer backdrop - and its assumption that it will only hold market share in the online market - is slightly downbeat and we would not be surprised to see the shares a little weaker today, following a bounce into today’s figures.” - James Anstead, Barclays