Ocado plumbs the depths after alert

Ocado's shares sank to an all-time low after the online grocer issued a profits warning yesterday, as it continues to struggle with "capacity constraints" at its warehouse in Hertfordshire.

Its warning on margins means Ocado will not have delivered a maiden pre-tax profit for the year to the end of November, according to analysts at Oriel Securities.

The loss-making grocer also blamed tough economic conditions for a slowdown in sales growth, as consumers "buy one or two items" fewer per order.

Ocado blamed the hit to its profit margins on an additional £3m investment in labour and shipping costs to ensure it protected customer service levels in its fourth quarter to 27 November, as it added more capacity to keep up with rising orders.

As a result of lower margins and sales, Ocado expects full-year earnings before interest, taxes, depreciation, and amortization of between £27.5m and £28.5m, lower than the consensus forecast of £34.3m before yesterday's unscheduled statement.

Andrew Bracey, the finance director, said: "We are very disappointed and disappointed on behalf of our shareholders."

Shares in Ocado plummeted by 12p, or 17 per cent, to 59.2p. This means the value of Ocado has tumbled by more than two-thirds since it floated at 180p in July 2010.

It had forecast full-year sales of £655m for the year just ended, but now expects revenues of £643m. While its sales jumped 16.7 per cent over the year, this is lower than the 19.5 per cent growth in its first half.

Mr Bracey said: "We had capacity constraints continuing in the fourth quarter.

"There has been a small impact from the economy in the basket size being lower."

Jonathan Pritchard, an analyst at Oriel Securities, said: "Either capacity constraints have actually got worse, or demand has slowed up because in the fourth quarter, sales growth fell to 10 per cent."

But Mr Bracey said after the addition of extra capacity it expected its performance to "come back quite strongly in the first half of next year".