Ocado delivers profits, but sales fall as Asda gains from price wars

Shares fall despite nearing profit

Ocado is feeling the impact of Britain’s supermarket price war, with slowing sales in the last few months.

It comes as high street rival Asda emerged as the big winner among its peers following heavy discounting.

The revelation sent shares in the online grocer down 4.4 per cent to 355p, even though the company posted its first first-half profit and the chief executive, Tim Steiner, confirmed it is on course to record an annual profit for the first time in its 14-year history.

Mr Steiner said: “It wasn’t our focus to hit an [annual] profit, but it appears we will, which I’m sure will upset a few people because they won’t be able to call us the loss-making grocer any more.”

However, the speed of sales growth nearly halved in the three months to 18 May compared with the first three months of the year, and the company remained cautious on the future speed.

Sales for the six months to 18 May were up 15.6 per cent to £442.4m, while pre-tax profits hit £7.5m compared with a £1m loss a year ago.

The company continued to benefit from its £210m link-up with Morrisons, adding £12.7m to its revenues from the deal, although Mr Steiner insisted Ocado would have made a profit even without the joint venture.

He also revealed its second warehouse in Dordon, Warwickshire, which it shares with Morrisons, is performing more efficiently than the original site in Hatfield, Hertfordshire.

A third warehouse will also be opened in Andover, Hampshire, at a cost of £80m.

However, the new site will be considerably smaller than its others, with Mr Steiner explaining that the new focus was to open smaller sites that could be as economically viable as larger ones.

Clive Black at Shore Capital, remained unconvinced. He said: “We do not see the business as a disrupter in the UK grocery market because it is irrelevant within the £175bn industry.”

Meanwhile, Asda has emerged as the major winner from the recent price war among the big four supermarkets, with signs that the Walmart-owned grocer’s early start on cost-cutting is stealing customers away from rivals Tesco and Morrisons.

The supermarket pledged last year to spend £1bn over the next five years to cutting prices, and launched massive reductions to tackle the rise of discounters Aldi and Lidl.

It saw sales jump 3.6 per cent in the 12 weeks to 22 June, according to Kantar Worldpanel.

By comparison, Tesco and Morrisons launched their own price cuts in only the last few months. However, their sales fell 1.9 per cent and 3.8 per cent respectively.

Ocado is also being hit by the cuts because of its price promise to match Tesco, although bosses insist it will continue to grow faster than its rivals.

In the last 12 weeks, sales at Sainsbury’s grew 3 per cent but Asda’s impressive rise sees it start to cement its position as second-biggest retailer behind Tesco, despite signs Sainsbury’s was catching up.

Start your day with The Independent, sign up for daily news emails
PROMOTED VIDEO
ebooks
ebooksA special investigation by Andy McSmith
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Software Development Manager

£40000 - £50000 per annum: Recruitment Genius: This is an exciting opportunity...

Ashdown Group: Product Manager - (Product Marketing, Financial Services)

£30000 - £35000 per annum + Benefits: Ashdown Group: Marketing Manager - Marke...

Recruitment Genius: Compliance Assistant

£13000 per annum: Recruitment Genius: This Pension Specialist was established ...

Ashdown Group: Market Research Executive

£23000 - £26000 per annum + Benefits: Ashdown Group: Market Research Executive...

Day In a Page

Isis hostage crisis: The prisoner swap has only one purpose for the militants - recognition its Islamic State exists and that foreign nations acknowledge its power

Isis hostage crisis

The prisoner swap has only one purpose for the militants - recognition its Islamic State exists and that foreign nations acknowledge its power, says Robert Fisk
Missing salvage expert who found $50m of sunken treasure before disappearing, tracked down at last

The runaway buccaneers and the ship full of gold

Salvage expert Tommy Thompson found sunken treasure worth millions. Then he vanished... until now
Homeless Veterans appeal: ‘If you’re hard on the world you are hard on yourself’

Homeless Veterans appeal: ‘If you’re hard on the world you are hard on yourself’

Maverick artist Grayson Perry backs our campaign
Assisted Dying Bill: I want to be able to decide about my own death - I want to have control of my life

Assisted Dying Bill: 'I want control of my life'

This week the Assisted Dying Bill is debated in the Lords. Virginia Ironside, who has already made plans for her own self-deliverance, argues that it's time we allowed people a humane, compassionate death
Move over, kale - cabbage is the new rising star

Cabbage is king again

Sophie Morris banishes thoughts of soggy school dinners and turns over a new leaf
11 best winter skin treats

Give your moisturiser a helping hand: 11 best winter skin treats

Get an extra boost of nourishment from one of these hard-working products
Paul Scholes column: The more Jose Mourinho attempts to influence match officials, the more they are likely to ignore him

Paul Scholes column

The more Jose Mourinho attempts to influence match officials, the more they are likely to ignore him
Frank Warren column: No cigar, but pots of money: here come the Cubans

Frank Warren's Ringside

No cigar, but pots of money: here come the Cubans
Isis hostage crisis: Militant group stands strong as its numerous enemies fail to find a common plan to defeat it

Isis stands strong as its numerous enemies fail to find a common plan to defeat it

The jihadis are being squeezed militarily and economically, but there is no sign of an implosion, says Patrick Cockburn
Virtual reality thrusts viewers into the frontline of global events - and puts film-goers at the heart of the action

Virtual reality: Seeing is believing

Virtual reality thrusts viewers into the frontline of global events - and puts film-goers at the heart of the action
Homeless Veterans appeal: MP says Coalition ‘not doing enough’

Homeless Veterans appeal

MP says Coalition ‘not doing enough’ to help
Larry David, Steve Coogan and other comedians share stories of depression in new documentary

Comedians share stories of depression

The director of the new documentary, Kevin Pollak, tells Jessica Barrett how he got them to talk
Has The Archers lost the plot with it's spicy storylines?

Has The Archers lost the plot?

A growing number of listeners are voicing their discontent over the rural soap's spicy storylines; so loudly that even the BBC's director-general seems worried, says Simon Kelner
English Heritage adds 14 post-war office buildings to its protected lists

14 office buildings added to protected lists

Christopher Beanland explores the underrated appeal of these palaces of pen-pushing
Human skull discovery in Israel proves humans lived side-by-side with Neanderthals

Human skull discovery in Israel proves humans lived side-by-side with Neanderthals

Scientists unearthed the cranial fragments from Manot Cave in West Galilee