Trade Resources Company News Ocado Plans to Develop as a Grocery Retailer Not a Logistics Firm for Hire

Ocado Plans to Develop as a Grocery Retailer Not a Logistics Firm for Hire

Tags: Agriculture, Food

Ocado plans to develop as a grocery retailer not a logistics firm for hire, insisted its boss, as the firm reported bigger losses in the first half of this year.

Ocado is a grocery retailer not a logistics firm for hire, insisted its boss Tim Steiner

"We are absolutely a grocery retailer," said Tim Steiner, chief executive, as the business released six-month results for the period ended May 19 2013 . "We have got a phenomenal customer business and we have done an outstanding job for our customers," he told BBC Radio 4's Today programme.

"We have pushed the range up for them to 31,000 [stock keeping units] in the last half and improved our on time delivery and fulfilment stats, we improved our web shop and mobile devices for them to interact with us."

The business reported a loss of £3.8M for the period, which it attributed to costs associated with its distribution deal with Morrisons and the opening of new warehouses. Earnings before interest, tax, depreciation and amortisation fell to £14.9M, down by more than 28% on the same period of last year.

But sales climbed by 15.6% to reach £355.9M, as the average order size grew by 1.6% to £114.90.

In May, Ocado signed a distribution deal with supermarket chain Morrisons, which prompted its long-standing existing partner Waitrose to consider legal action .

'Totally separately'

Steiner pledged that "for the moment" the Ocado business would be run totally separately from the Morrisons' online distribution channel. "Ocado.com will remain Ocado.com, selling wonderful quality products from Waitrose alongside Ocado own-label and branded goods and the consumer will see a totally separate business in Morrisons.com," said Steiner.

"They will have no idea that we are behind the logistics or intellectual property that drives that business. There will be no Ocado branding on any part of the Morrisons' business."

But City analyst Shore Capital remained cautious about the prospects for Ocado. While Ocado had delivered a "marvellous (320%) appreciation" in its share price for investors, Shore Capital analysts Clive Black and Darren Shirley remained unconvinced about the strength of its business model.

'Marvellous appreciation'

"Whilst Ocado has surprised us with the nature and extent of the deal that it has agreed with Morrisons, we do not see it as a transformational transaction from a financial and so valuation perspective, particularly given where the shares are now valued," said Black and Shirley.

Ocado's cash flows, earnings, dividend flows and returns need to be meaningful and sustainable to justify a substantial premium to the sector and market, they added.

At present, Ocado remained a business that "continues to be valued on unsubstantiated potential rather than cash flows with high visibility."

One of the few good pieces of news delivered by Ocado in recent years was the appointment of Sir Stuart Rose as chairman in January, they added.

Shore Capital repeated its 'sell' advice on Ocado's stock.

Source: http://www.foodmanufacture.co.uk/Business-News/Ocado-IS-an-online-grocer-says-boss-as-losses-grow
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Ocado Is an Online Grocer, Says Boss as Losses Grow