Ocado Group, which produces online grocery solutions for retailers worldwide and is traded in the FTSE 100 index on the London Stock Exchange, is losing its strength. Ocado’s losses increased to £500 million last year as the grocery industry struggled with a trifecta of high prices, sluggish consumer confidence, and a move away from internet buying once pandemic restrictions were lifted.
Fuel, energy and labour costs to put pressure
Ocado Group posted a loss before tax of £501 million for 2022, while retail sales fell 3.8% to £2.2 billion. Shares slumped 8.6% to 571p as investors recoiled at the worse-than-expected results. Tim Steiner, Chief Executive Officer of Ocado Group, said the loss was due to inflationary pressure from fuel, energy and labour costs, as well as increased budgetary pressures on consumers. The firm was unable to pass all its increased costs on to customers, so it ramped up its voucher scheme to improve customer loyalty.
Ocado is stuck between a rock and a hard place, according to Richard Hunter, Head of Markets at Interactive Investor, as the two aspects of its company continue to encounter separate challenges. The so-called “Covid unwind” has had an effect as consumers look for cheaper product options elsewhere and buying habits become more routine. Investors have been intrigued by Ocado’s innovative technology, but as their patience wanes, there is a risk that the company will continue to be a “jam tomorrow” stock.
