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FTSE 100: Ocado loses more than £500m as shoppers cut back

A delivery driver returns empty crates to his Ocado delivery van after supplying a residential address near Liverpool in north west England, on February 10, 2019, during a delivery of food and drink for supermarket Waitrose. (Photo by Paul ELLIS / AFP)        (Photo credit should read PAUL ELLIS/AFP via Getty Images)
Sales at Ocado dropped 3.8% last year as shoppers bought fewer items on each visit. Photo: AFP via Getty Images

Ocado (OCDO.L) lost more than £500m as shoppers cut back spending amid the cost of living crisis.

The amount that each customer spent per shop in the company’s supermarket arm fell from £129 in 2021 to £118 last year.

The online supermarket and technology group said the average number of items a customer was buying per visit to its online supermarket dropped from 52 in 2021 to 46 last year, the same amount as before COVID.

The grocer said on that its pre-tax loss rose to £501m in the year to last November, up from £177m the previous year.

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Revenues at Ocado Retail, its joint venture (JV) with Marks & Spencer, fell by 3.8% during the year, despite the company reporting record sales over Christmas.

Chief executive Tim Steiner said: "Ocado Retail, our UK JV with M&S, has shown its resilience against a backdrop of higher costs and smaller baskets, reflecting the COVID unwind and the UK cost of living crisis, by growing customer numbers and increasing online market share.

"As the COVID unwind fades and customer growth continues the business will start to recover the fixed costs of recent capacity commitments."

Shares in Ocado slid as much as 9% after the online grocery business posted the near-tripling of pre-tax loss.

Richard Hunter, head of markets at Interactive Investor, said Ocado is “caught between a rock and a hard place” as its technology solutions arm and retail division continue to face different tests.

“The Solutions business, on which most of the group’s hopes for future growth and profitability is pinned, has yet to deliver on a sufficient scale to appease investors.

"The promises of large-scale adoption for its cutting-edge technology has yet to fully materialise, after some considerable time, which has led to investors shunning the stock in their droves. Over the last two years, the share price has fallen by 72%.

"Yet progress is evident in this part of the business. UK solutions revenue grew by 13% to £802.7m over the period, while the International unit saw revenues spike by 122% to £148m.

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"For the retail business, from which the vast majority of revenues are currently derived, the environment is getting tougher. The so-called 'COVID unwind' has had an impact as shopping habits normalise, while given some UK economic hardship, customers have begun to seek cheaper product offerings elsewhere.

"It is also evident that while customers are still coming to Ocado, it tends to be more selective. As such, even though active customers rose by 13% to 940,000, average basket sizes falling from £129 to £118, leaving the retail part of the business with a 3.8% decline in revenues to £2.2bn, marginally shy of expectations."

Ocado’s stock has fallen 54% in the last year and was the worst performer on the FTSE 100 in 2022.

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