Ocado finally delivers a profit

Online grocer Ocado reported a pre-tax profit of £7.5m for the six months to the end of May, which leaves it on track for the first annual pre-tax profit since its launch in 2000.

It noted, however, that sales growth has slowed from 18% year-on-year in the first quarter to 15.6% over the half-year as a whole, when sales exceeded £400m. The average order size has declined marginally to £114.30.

What the commentators said

You’d think that the first profit in 14 years would instil some “certainty and confidence” in investors, said Nils Pratley in The Guardian. But the shares slid by 4.5% on the news as “questions keep coming”.

For instance, why are sales rising only slightly faster, or broadly in line with, the overall online grocery market? After all, chief executive Tim Steiner has said he thinks the big supermarkets’ online offerings are years behind Ocado when it comes to quality and accuracy of service.

Investors worry that Ocado, even if it does have a bright long-term future, could now fall victim to the supermarket price war, said The Daily Telegraph. It “cannot remotely match the physical and financial scale of Tesco”.

It hasn’t been able to make a profit selling the high-margin products it gets supplied from Waitrose, added The Daily Telegraph, so “what hope does it have when margins decline”?

Furthermore, the price war has crept onto Ocado’s home turf: online shopping delivery charges. Grocery shopping is undergoing the upheaval Ocado has always predicted. But that “does not mean it will be one of the winners”.

• Stay up to date with MoneyWeek: Follow us on TwitterFacebook and Google+

MoneyWeek magazine

Latest issue:

Magazine cover
Cleaning up

Profiting from the fight against pollution

The UK's best-selling financial magazine. Take a FREE trial today.
Claim 4 FREE Issues

Which investment platform?

When it comes to buying shares and funds, there are several investment platforms and brokers to choose from. They all offer various fee structures to suit individual investing habits.
Find out which one is best for you.


29 May 1660: Charles II restored to the throne  


While Charles II was formally proclaimed King by parliament in April, he only reached London on this day in 1660.

The Kids' Portfolio: the four best funds to buy for your children

Investing for your children's long-term future is an excellent idea. But what should you buy? The Kids' Portfolio is a simple collection of four funds intended to be tucked away for 20 to 40 years.