- Shares down 32% year-to-date
- Tech solutions revenue up 44%
- Ocado Retail revenue up 7%
Shares in Ocado (OCDO) ripened 1.7% to 499p this morning after the online grocery specialist reported a group adjusted profit of £51.6 million for the 53 weeks ended 3 December 2023 compared with a £74.1 million loss in the same period a year ago.
Total revenue was up 9.9% to £2.8 billion for the year.
And the online grocery specialist reported a 44% increase in revenue from its technology solutions arm and a 7% increase in revenue from Ocado Retail, its joint venture with Marks & Spencer (MKS).
During the period, Ocado Retail’s share of online grocery increased from 12.3% to 12.7% and its share of the overall UK grocery market increased from 1.6% to 1.7%.
EXPERT VIEW
Analysts were upbeat about Ocado’s full year performance but remain cautious.
Chris Beckett, head of equity research at Quilter Cheviot said: ‘Ocado Group, the online grocery and technology company, reported strong results for the full year 2023, beating market expectations, with the technology solutions segment reporting a 44% increase in revenue.
‘However, Ocado also faced some challenges and headwinds in 2023, such as the absence of new orders for automated warehouses (customer fulfilment centres) for its largest partner, Kroger (KR:NYSE), in the US as it strives to improve returns from existing sites and management are distracted by the proposed merger with Albertsons (ACI:NYSE).’
‘Looking ahead, Ocado said it expects its technology solutions revenue to grow by 15-20% in 2024, which is lower than the 44% growth achieved in 2023. Ocado also said it expects its UK retail business to deliver a high mid-single-digit margin in the medium term, which is higher than most bricks and mortar retailers, demonstrating the potential of its automation and efficiency.’
BASKET SIZE PROBLEM
Russ Mould, investment director at AJ Bell, said: ‘One problem Ocado has faced is smaller basket sizes as, given the fixed costs involved in packing and delivery, people ordering less has a material impact on profitability. The hope will be that an improving economic picture allows shoppers to loosen the purse strings a touch and buy a bit more.’
DISCLAIMER: Financial services company AJ Bell referenced in this article owns Shares magazine. The author of this article (Sabuhi Gard) and the editor (James Crux) own shares in AJ Bell.
Disclaimer: The author (Sabuhi Gard) owns shares in Ocado.
