Ocado Says Switch to Online Shopping is Permanent
Online grocer Ocado says the switch to internet shopping amid the coronavirus lockdown has led to a “permanent redrawing” of the retail landscape. Its comments came as it said sales during the first half of 2020 jumped 27% to more than £1bn.
“The world as we know it has changed,” said chief executive Tim Steiner. “As a result of Covid-19, we have seen years of growth in the online grocery market condensed into a matter of months; and we won’t be going back.”
“We are confident that accelerated growth in the online channel will continue, leading to a permanent redrawing of the landscape of the grocery industry worldwide.”
He said Ocado was now the fastest growing grocer in the UK, thanks to a 50/50 partnership with Marks and Spencer announced last year.
As part of the deal, which saw M&S take a half-share in Ocado’s retail business, Ocado will start delivering M&S grocery products from September, when its current deal with Waitrose expires.
The group reported a loss before tax of £40.6m in the six months to the end of May, blaming an increase in investment to handle the higher demand generated as a result of the coronavirus pandemic.
During the period the company opened its first two customer fulfilment centres abroad, for Casino in France and Sobeys in Canada, while increasing capacity in the UK.
The loss was smaller than the £147.4m posted in the same period last year, although that figure included £99m of costs incurred as a result of a major fire at its warehouse in Andover.
But after raising £1bn through an equity and bond issue last month, Ocado said it had £2.3bn in cash on its balance sheet.
“There is evidence to suggest many shoppers will likely continue buying their groceries online once lockdown measures have been lifted completely, but it will be difficult for Ocado to maintain the sales registered at the peak of the crisis,” said John Moore, senior investment manager at Brewin Dolphin.
“Nevertheless, Ocado has a strong balance sheet and the Covid-19 pandemic has super-accelerated many of the trends that have led to its exceptional share price growth over the last few years, placing the company in a good position for the future.”
Separately, discount grocer Lidl has revealed plans to open a shop a week until Christmas, creating 1,000 jobs. The 25 new stores will be opened across England, Scotland and Wales with sites in Selhurst, Harrow Weald, Coleford and Llandudno Junction opening in the coming weeks.
By the end of 2023 it plans another 100 stores across Britain, creating 4,000 more jobs, and bringing its total number of shops to 1,000.
“It is testament to the continued hard work of our colleagues that we are able to continue forging ahead with our expansion plans, despite the challenging circumstances that have been faced over the past months,” said Lidl GB boss Christian Härtnagel.