Capacity problems hit profits at Ocado

Online grocer Ocado said its full year profits would be up on last year but had been hampered by distribution issues.

The company, which sells Waitrose goods, said earnings were expected to be in the range of £27.5m to £28.5m in the year to 27 November, compared to £22m in 2010.

Gross sales were approximately £643m for the full financial year, up 16.7% on the previous year.

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Ocado said the group continued to operate under capacity constraints at its Hatfield distribution centre in the fourth quarter.

Profit margins were impacted by these production issues as well as the employment of additional labour at Hatfield to protect customer service levels during work to install further capacity.

This increased labour was expected to be phased out as the installation works were completed, the company said.

The construction of a second distribution hub in Warwickshire was on time and within budget, it added.

Chief executive Tim Steiner Tim Steiner, said he was disappointed that Ocado did not achieve as large or as early an increase as had been originally planned.

"There is more work to be done and we are focused on delivering capacity and sales growth in the first half of 2012," he said.

For the full financial year, 98.3% of items were delivered exactly as ordered and 92.3% of orders were on-time or early for their one hour delivery slots, Ocado said.