Ocado reports major losses as sales drop amid 'challenging' times

Online grocery and technology firm Ocado has posted a £500 million loss for last year as customers continue to move to physical stores, buy less and use more discount vouchers amid the cost-of-living crisis.

2022 was “a challenging year for Ocado Retail”, the company told shareholders today (28), reporting that pre-tax losses widened to £500.8m for last year, up from £176.9m in 2021. Revenues at Ocado Retail, its joint venture with Marks & Spencer, fell by 3.8 per cent during the year, despite the company reporting record sales over Christmas.

As fuel and food prices have surged around the world, Ocado too has been grappling with higher cost inflation from food suppliers, and raised its average selling price by 4.5 per cent last year, to £2.55 an item from £2.44.

“Over the last year every company has had its business model tested by a combination of macro-economic and geopolitical headwinds,” the Ocado chief executive, Tim Steiner, said.

“Ocado Retail 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.”

Customers have been ordering fewer items and using more discount vouchers. The average basket size fell to 46 items in 2022 from 52 in 2021, taking the average value to £118 from £129.

Commenting on Ocado's numbers, Joe Dawson, Retail Analyst at GlobalData, states that after a turbulent year of inflationary headwinds and macroeconomic challenges, Ocado has been one of the losers in the food and grocery market as consumers returned to instore shopping and switched to discount retailers for their food & grocery shopping.

"Being an online pureplay seriously hindered Ocado Retail in FY2021-22, as consumers shifted away from purchasing food and groceries online as consumers’ lives started to return to normal in early 2022, and rising costs led to consumers seeing grocery delivery as a luxury rather than a necessity. The retailer was also affected by its mass market positioning, with a reputation for higher prices that will have forced some shoppers to trade down from the retailer.

"While the total number of active Ocado customers increased 13.0 per cent year on year to 940,000, growth was restricted by both average basket value and average basket size falling 8.5 per cent and 11.5 per cent respectively as consumers returned to physical stores for the bulk of their shopping.

"These declines came despite Ocado’s average selling price rising 4.5 per cent year on year, as grocery supply chains were seriously affected by high inflation driving up costs for suppliers and retailers alike," says Dawson.