Ocado, the prominent British online supermarket and technology group, has achieved underlying profitability in the first half of the year, signaling positive progress for the company. In the six months leading up to May 28, the group swung to a profit, reporting core earnings (EBITDA) of £16.6 million ($21.7 million), exceeding the consensus forecast that had predicted a loss of £16 million. This marked a significant turnaround from the £13.6 million loss recorded during the same period in the previous year.
One of the key contributors to Ocado’s improved performance was its Technology Solutions division, which reported a profit for the first time. Additionally, Ocado Retail, the online supermarket joint venture with Marks & Spencer, also returned to profit during the second quarter.
The positive financial results have had a notable impact on the company’s stock performance, with Ocado’s shares soaring by 13.5% in morning trading. However, it is worth noting that over the last year, the company’s shares have experienced a 15% decline.
Analysts at Jefferies have observed the upward pressure on consensus expectations for the full-year 2023 performance, indicating optimism about the company’s future trajectory.
Ocado’s advanced robotic warehouse technology has been a driving force behind its success, leading to collaborations with international clients such as Kroger in the United States, Aeon in Japan, and Casino in France.
Founded in 2000 by three former Goldman Sachs bankers, including CEO Tim Steiner, Ocado has been the subject of varying opinions among analysts and investors. While some view its automated warehouse delivery model as the future of grocery shopping, others remain skeptical, seeing it as a costly and complex venture unlikely to achieve sustained profits.
Clive Black, an analyst at Shore Capital and a long-term Ocado skeptic, pointed to the losses at the pre-tax level, which widened to £289.5 million. Despite the positive strides in underlying profit, the company continues to face challenges.
Nonetheless, Ocado remains steadfast in its financial guidance provided during its full-year results in February. The company maintained its outlook for Technology Solutions to achieve “positive” EBITDA for the full 2022-23 year, while Ocado Retail is expected to achieve “marginally positive” EBITDA, and its UK Logistics unit is projected to maintain “stable” EBITDA.
Previously, Ocado experienced a sharp surge in its shares, reaching up to 47%, after reports emerged of possible takeover interest from multiple U.S. suitors, including Amazon. However, both Ocado and Amazon declined to comment on the matter at the time, leaving the situation open to speculation.