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".

Recommended

Aviva: a share for income investors to tuck away
Share tips

Aviva: a share for income investors to tuck away

Insurance giant Aviva is one of the highest yielding stocks in the FTSE 100 – and it’s cheap, too, making it a tempting target for income investors. R…
18 May 2022
The ten highest dividend yields in the FTSE 100
Income investing

The ten highest dividend yields in the FTSE 100

Rupert Hargreaves looks at the FTSE 100’s top yielding stocks for income investors to consider.
18 May 2022
Three fast-growing, undervalued UK mid-cap stocks to buy now
Share tips

Three fast-growing, undervalued UK mid-cap stocks to buy now

Professional investor Katen Patel of the JPMorgan Mid Cap Investment Trust picks three fast-growing UK mid-cap stocks to buy now.
18 May 2022
Should you buy Vodafone shares, or steer clear?
Share tips

Should you buy Vodafone shares, or steer clear?

Vodafone grew revenue by 4% and profit by 11% last year, and offers investors a 6.4% dividend yield. So should you buy Vodafone shares? Rupert Hargrea…
17 May 2022

Most Popular

Get set for another debt binge as real interest rates fall
UK Economy

Get set for another debt binge as real interest rates fall

Despite the fuss about rising interest rates, they’re falling in real terms. That will blow up a wild bubble, says Matthew Lynn.
15 May 2022
Is the oil market heading for a supply glut?
Oil

Is the oil market heading for a supply glut?

Many people assume that the high oil price is here to stay – and could well go higher. But we’ve been here before, says Max King. History suggests tha…
16 May 2022
Value is starting to emerge in the markets
Investment strategy

Value is starting to emerge in the markets

If you are looking for long-term value in the markets, some is beginning to emerge, says Merryn Somerset Webb. Indeed, you may soon be able to buy tra…
16 May 2022