Ocado finally delivers a profit

Online supermarket Ocado has finally delivered its first annual profit after 15 years.

After 15 years and around £500m of investment, online supermarket Ocado has delivered its first annual profit. It earned £7.2m before tax in the year to November, compared to a £12.5m loss the year before. Sales excluding VAT and vouchers hit almost £1bn. Ocado now has 453,000 customers and 8,000 employees. Long-suffering investors will not be rewarded with a dividend; all the profits will be ploughed back into the business.

What the commentators said

But can it? "UK grocery is a brutal business." Other supermarkets are getting their online act together, agreed economist.com. Click-and-collect, which allows customers to fetch their shopping at the supermarket, will "challenge Ocado with its fleets of delivery vans". New competitors, such as AmazonFresh, will also be a test.

There's more to this story than groceries, though, said James Quinn in The Daily Telegraph. Ocado has invested heavily in IT and sees itself as a technology platform that "can be rolled out to new retail customers with just small tweaks". It says it plans to sign a deal with an international partner this year.

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The launch of Morrisons online service, which runs on Ocado infrastructure, "is a start" towards the vision, reckoned Lex. But until we get at least one promised international deal for Ocado's "wizzy", bespoke technology, concluded Alistair Osborne in The Times, its valuation 155 times 2015 earnings remains "bonkers".

Andrew Van Sickle

Andrew is the editor of MoneyWeek magazine. He grew up in Vienna and studied at the University of St Andrews, where he gained a first-class MA in geography & international relations.

After graduating he began to contribute to the foreign page of The Week and soon afterwards joined MoneyWeek at its inception in October 2000. He helped Merryn Somerset Webb establish it as Britain’s best-selling financial magazine, contributing to every section of the publication and specialising in macroeconomics and stockmarkets, before going part-time.

His freelance projects have included a 2009 relaunch of The Pharma Letter, where he covered corporate news and political developments in the German pharmaceuticals market for two years, and a multiyear stint as deputy editor of the Barclays account at Redwood, a marketing agency.

Andrew has been editing MoneyWeek since 2018, and continues to specialise in investment and news in German-speaking countries owing to his fluent command of the language.