Ocado boss Tim Steiner was today trumpeting a “landmark year” for the online retailer.
He’s not wrong. The long-awaited flotation got away despite more prophecies of doom than an Old Testament epic. And the share price has rallied impressively in the past few weeks, albeit with the help of some less than convincing speculation.
Chuck in other moves like the ramping up of its own-label offer and you get the sense of a business with momentum.
Best of all for Steiner and pals was the news that Ocado has finally turned a profit, generating pre-tax earnings of £300,000 in the final three months of its financial year.
While Tesco earns that in the time it takes you to sign up for a Clubcard, it would be churlish to disregard the symbolism of that particular monkey clambering off the company's back.
On the other hand, pre-tax losses for the year topped £12m – down by more than 50% but still leaving the business a long way from getting into the black.
“Moving into profitability in the final quarter is great news for Ocado and will potentially provide a boost to the company’s share price,” says Verdict analyst Neil Saunders.
“However, one quarter of profit does not necessarily show that the company is on a firm trajectory to continued profit growth.”
Saunders points to “a whole host of downside risks this year”, such as consumers trading down and Waitrose muscling in on Ocado’s home turf in the capital.
And while the problem of fuels costs is certainly not unique to Ocado, it’s worth taking a look at the wholesale sector, where cash & carries are massively outperforming the delivered market.
Saunders concludes: “While Ocado’s customer proposition is in excellent shape, the financials of the company are sensitive to all of these shifts, which could provide disruptive to continued profit growth.”
Ocado must prove that today’s landmark is just the beginning.
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