Ocado lost almost a tenth of its value yesterday, despite recording its first interim profit, as investors took fright at the online grocer's lack of capacity.
Tim Steiner, Ocado's chief executive, said the group had performed strongly across all measures and had been upfront about its need to increase warehouse capacity to maximise sales.
"The only piece of news that we would have liked to have been better was our 21 per cent sales increase. We told the market six weeks ago that we had capacity constraints. We have been capacity constrained and we have still grown 21 per cent."
The shares fell 17p, or 9 per cent, to 170p – their lowest this year and taking them under the 180p flotation price last July.
Ocado swung to a pre-tax profit of £200m in the first half of its financial year from a £6.7m loss a year earlier. But investors homed in on the constraints placed on growth by the capacity shortfall at its giant warehouse in Hatfield.
Orders delivered on time or early dipped to 92.7 per cent from 94.9 per cent, partly due to stretched capacity. Mr Steiner said the drop in delivery quality was "very, very marginal" but "miles ahead of our competition".
The lack of warehouse space meant the company had to limit its marketing for new customers, Mr Steiner said. He said Ocado was adding capacity all the time and that its new distribution centre was on schedule for completion by the end of 2012.
"We have shown pictures of the building being erected on time and on budget in Warwickshire. It's frustrating being the only retailer that can't grow as fast as the customers want to buy the products," he added.
The group, founded by Mr Steiner and two fellow ex-Goldman Sachs bankers in 2000, mostly sells products from Waitrose, the upmarket grocer that had agreed not to compete against Ocado in London. Waitrose is gearing up to take on Ocado in the capital when the agreement lapses in a few days.
Shore Capital analysts said Waitrose could be a big threat to Ocado if it can match its online rival's service levels. They added: "We also point out that Marks & Spencer and Morrisons have yet to enter the market. The former could be the greatest challenge of all to Ocado."
Mr Steiner said more online grocers was good for Ocado because once a supermarket customer had taken the plunge to shop online, they were five to 10 times more likely to switch to Ocado than if they still shopped at a store. To wean itself off Waitrose, Ocado is launching its own products and it yesterday unveiled a partnership with Carrefour to sell the French chain's food products. Mr Steiner said the link-up was the first of many "speciality" ranges that would include Oriental, kosher, halal and diabetic foods. Mr Steiner and his colleagues will be free to sell their shares on 5 July when a post-flotation lock-in expires. He declined to comment on whether they would sell stock and said it was "unfair to keep being asked" because directors would be under constant pressure not to sell.