Ocado boss: We were naive to accept orders but US firms should have worked harder
After its share price tumbled on Thursday morning, the boss of Ocado was given the chance to evade the blame for shuttered warehouses and job cuts.
The retail tech group’s financial results set out easing losses and slowly climbing revenue. But it was the plans to cut 1,000 jobs – mostly at the company’s Hertfordshire HQ – which made a splash, prompting a ten per cent share drop at early trading.
Ocado has invested heavily in automation and AI in recent quarters and is looking to make cuts of £150m as it tries to slim down its operations.
The group had agreed exclusivity deals with retail giants in North America but US firm Kroger closed three warehouses last year, knocking almost a fifth of the company’s UK value.
Canadian retailer Sobeys added insult to injury in January, when it announced its decision to shut the Calgary facility where it used Ocado’s robots, citing a “slower than anticipated” rate of growth.
Steiner: Ocado ‘naive’ to accept orders
Fielding questions from analysts following the results, chief executive Tim Steiner was asked whether he felt pundits had been too “gentle” when assessing Ocado’s culpability in these warehouse shutdowns.
It seemed not, as Steiner claimed the failure of the sites came down to Ocado’s innocence rather than poor planning: “Did we just accept the orders? Yes. Is that, in hindsight, a bit naive? Yes.”
Steiner seemed to believe the group’s North American partners held more of the blame for the collapse of these projects, saying: “Our partners are the ones that need to drive the acquisition of customers.
“We can help them […] but we need our partners, having made a commitment to a site, to work very hard to put volume into that site.”
Steiner suggested he wished he had told Sobeys to build its warehouses in a different order, so the earlier sites had been placed in areas of higher demand.
“We’ve been aware of the challenges of our early business model and we’ve been working on that for the last eight years. We obviously still have to live with the consequences of those early sites and those early decisions,” he said.
Ocado a ‘vehicle for shareholder destruction’
Ocado Group runs robotic warehouses for supermarket chains and recently transferred control of its UK food delivery company to Marks & Spencer, meaning the two firms report separately.
Steiner’s warning of redundancies spooked the markets on Thursday morning as shares in Ocado tumbled ten per cent on the market open, leaving the stock down two per cent in the year to date.
Thursday’s results saw operating costs at the online retailer jump three per cent to £1.6bn while the group’s adjusted loss before tax eased slightly, shrinking seven per cent to £353m.
Shares in the FTSE-250-listed Ocado Group, recovered slightly to 8.5 per cent after dropping ten per cent at Thursday’s open, but left the stock down more than nine per cent since the start of the year.
Chris Beauchamp, chief market analyst at IG, said: “Ocado continues to be one of the most impressive vehicles for shareholder value destruction we have seen.
“For a company once seen as the future of supermarket delivery, its fate has been to be overtaken by its more pedestrian, but larger, rivals, utilising their size and reach and building on their existing business to tell a much more compelling story for investors.”