Ocado's profit slips but customer numbers and orders grow as consumers shift to online ordering

 
Courtney Goldsmith
Follow Courtney
20th Anniversary Of First Online Sale
Ocado plans to make more international software deals (Source: Getty)

Ocado's profit fell in the first half of 2017, but the retailer said it will continue increase its share of the competitive UK market as more consumers shift to online shopping.

The figures

The online supermarket and delivery company said profit before tax fell 9.4 per cent to £7.7m in its half-year results to 28 May.

Order volumes grew by 15.6 per cent to an average of 260,000 orders per week, but the average Ocado basket size value declined by 1.4 per cent to £108.45 due to promotions.

The number of active customers using the service jumped 12.7 per cent to over 600,000.

Ocado's share price was up 1.24 per cent at 293.2p in morning trading.

Why it's interesting

In June, Ocado announced its first international partnership with a European retailer, which is yet to be named, to use its software Ocado Smart Platform (OSP).

The deal came after Ocado began a similar partnership with Morrisons.

Today Ocado said this deal would be the "first of many" as the market shifts more towards online grocery shopping.

Chief executive Tim Steiner also said the company is focusing on investing further into innovative technologies. Last month, Ocado revealed it was trialling self-driving delivery cars.

Ocado's shares benefited immediately after Amazon's £13.7bn bid for upmarket US grocer Whole Foods as investors speculate over the future of the sector.

John Ibbotson, director at retail consultancy Retail Vision, said: “In tech terms, Ocado is at the front of the grocery starting grid but even then its future is not guaranteed.

"While it is no mean feat to increase sales in the current environment, basket sizes are declining, profits are down and the debt mountain continues to grow.

“Ocado needs a retail giant to buy up its tech or take it over, and soon. No wonder shareholders are demanding a shake-up."

What Ocado said

Steiner said: "After several years of price deflation in the UK, we have seen this begin to ease in the period and, when combined with our increasing scale and operational efficiencies, this trend will support the continued profitable growth of our retail business.

"As the channel shift to online advances we continue to gain share in a competitive UK market. We expect the trend for grocery shopping online to continue as consumers become more tech savvy and gain confidence in the online services available. Ocado will be a natural beneficiary of that trend thanks to its industry-leading customer offer. We continue to build new facilities in the UK in order to meet the increasing demand we see.

Grocery retailing is changing and we are ideally positioned to enable other retailers to achieve their online aspirations. We expect our recently announced international partnership to be the first of many and look forward to helping more retailers provide a high quality service to their customers in this rapidly evolving market.