Ocado finally delivers a profit

Shares in Ocado have slid despite the online supermarket making its first profit in 14 years.

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

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".

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