Ocado shares hammered after profit warning

Investors rushed to sell online grocer Ocado after its said full year profits had been hampered by distribution issues.

Shares fell almost 10% in morning trading after Ocado said it had to operate "under capacity constraints" at its Hatfield distribution centre in the fourth quarter.

Profit margins had been hit by production issues as well as the cost of employing extra staff as it installed further capacity, the company said.

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

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.

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 in sales 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.