Ocado faces Olympic Games challenge

Hatfield, UK: Ocado’s chief executive, Tim Steiner warns of uncertainty about the effect of the forthcoming Olympic Games on home delivery businesses.

He said the internet grocer was facing “challenging and uncertain” trading conditions after disappointing sales over the jubilee holiday weekend. “We have already seen some disruption from the jubilee events and there is uncertainty as to the effect of the forthcoming Olympic Games,” said Steiner.

All Ocado’s delivery slots are usually fully booked on a Friday so the grocer, which delivers Waitrose groceries, was unable to take advantage of the surge in demand met by other supermarkets on the eve of the four-day holiday weekend. Top line operating profits at Ocado increased 4.5% to £14.9m in the six months to 13 May with  a small profit of £200,000 at a pre-tax level.

Sales rose 12% to £332.3m with growth accelerating in its second quarter, raising hopes it has got to grips with bottlenecks at its distribution centre at Hatfield, Hertfordshire, which spawned a string of profit downgrades last year.

Ocado is spending £210m on a second distribution centre in Dordon, Warwickshire which will increase its sales potential next year but in the meantime is putting a strain on its finances. Its debt has increased to £71.3m compared with £19.2m a year ago.

Analysts say Ocado is being outflanked by larger rivals copying its service model, offering one-hour delivery slots and delivery subscription services. Some analysts are also sceptical about its centralised base in Hatfield: the model differs from supermarket rivals that fulfil internet orders by dispatching items from the shelves of local stores.

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