Finally in the money

10/02/2015
The online grocer has announced its first-ever profit. But there are plenty of risks ahead
IT WAS a long time coming, and much overdue. But on February 3rd Ocado, the world’s largest online-only grocer, announced that it has finally made a full-year profit, its first since the British-based firm was founded in 2000. The result was pretty much in line with analysts’ expectations, so the share price did not soar. But the news was welcome nonetheless in the British grocery business, a sector that has mostly been producing profit warnings, job cuts and store closures over the past year or so.

In 2014 Ocado made a pre-tax profit of £7.2m ($10.9m) on revenues of £948.9m. By contrast the company had lost £12.5m the previous year. To move into the black, says Tim Steiner, the chief executive and co-founder, the company has exploited the only channel that has seen any overall growth in the British grocery business, namely online sales. "While the broader grocery market was characterised by intense competition with minimal growth," he said of the results, "we continued to grow ahead of the online grocery market and significantly ahead of the market overall." Sales at Ocado increased by 15% during the six months to the end of November, and overall the number of customers grew to 453,000. To cope with the demand, the firm is opening a big new automated warehouse in Andover, Hampshire, late this year, and another one is planned for 2017.
Ocado sells its own brands, but has also benefited from its long-standing tie-in with Waitrose, a posh supermarket, and its more recent hook-up with the more mid-market Morrisons. The future of its supply arrangement with Waitrose, though, is uncertain; it may pull out in 2017 and try to go it alone with its own online sales service, Waitrose.com. But Mr Steiner has reassured investors by saying that Ocado is in discussion with other potential partners, both at home and abroad. He has also announced that despite the profits there will still be no dividend payments—all the cash will be ploughed back into the company, to fund its expansion.
That maybe just as well, because Ocado will need all the resources it can muster as it faces more competition than ever before. Other supermarkets had got into the habit of neglecting their delivery businesses, but they have now belatedly realised that they will all need a strong online presence in the future, especially to fend off the threat from the hard discounters Aldi and Lidl. These two German supermarkets have been gobbling up market share from Tesco, Morrisons, Sainsbury’s and others over the past few years by offering fewer products more cheaply. But they are store-based businesses, and therefore perceived to be vulnerable to the growth, albeit from a low base, of online sales.
Other retailers and supermarkets have thus been developing new online services very quickly, such as “click and collect”. This allows customers to buy groceries online and then to nominate a place to pick the stuff up from, rather than having to wait at home for deliveries (which is often impractical for people with full-time jobs). This model has proved very successful at Asda, Tesco and John Lewis, a chain of department stores, for instance. But this new way of distributing groceries to customers will challenge Ocado, with its fleets of delivery vans. Equally, the potential arrival in Britain of new competitors such as AmazonFresh will also test Ocado. In short, there will be little chance for Ocado to rest on its laurels, fresh and green as they may be.

Fonte:http://www.economist.com/news/business-and-finance/21641994-online-grocer-has-announced-its-first-ever-profit-there-are-plenty-banana-skins?fsrc=scn/tw/te/bl/finallyinthemoney

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