Ocado‘s annual earnings shot up by 69 per cent after demand for online grocery shopping soared during the pandemic.
The online grocer posted underlying group earnings of £73.1m for the year to 29 November, up from £43.3m the previous year, as revenues rose a third to £2.3bn.
Earnings in its retail arm, a joint venture with Marks & Spencer, more than trebled to £148.5m, up from £40.6m the previous year, on sales up 35.3 per cent.
The firm narrowed pre-tax losses to £44m from £214.5m as the online shopping boom helped offset heavy investment.
Chief executive Tim Steiner said: “The rapid acceleration of many pre-existing trends in business and society has been a feature of the Covid-19 crisis and the dramatic channel shift in grocery is a clear example of this. The landscape for food retailing is changing, for good.”
Mr Steiner dismissed calls for an online sales tax after Tesco urged the chancellor, Rishi Sunak, to introduce a 1 per cent levy for internet competitors, decrying the tax as “wholly inappropriate”.
He said: “I don’t think it’s appropriate for anyone to put a sales tax on a retailer because they operate from different premises or are an efficient operator.”
Discussing calls for a windfall tax for those sectors that have benefited amid the pandemic, he added: “People who make profits generate taxes.”
Ocado pledged to invest an extra £30m in technology to meet the surging demand during the pandemic and said it is hiring another 600 staff in its IT division, after taking on 500 in 2019-20.
But the company warned retail sales growth over the current year is dependent on Covid-19 restrictions as it said the pandemic will continue to have a “significant impact on group performance”.
Ocado said the planned opening of three new high-tech warehouses will support greater availability of delivery slots for customers, while it is also set to ramp up the rollout of Zoom, its new same-day service, inside the M25.
The group’s first Zoom site is full, with a second secured and it is on the lookout for another 12.
Ocado’s results showed that its average basket value jumped from £106 to £137 due to the surge in demand.
The figures also revealed that its UK solutions and logistics division, which provides services to the Ocado and M&S joint venture, alongside a contract with Morrisons, saw underlying profits fall 38.4 per cent to £44.4m. But sales at the division rose by 13.6 per cent over the year.
The firm added that legal costs are expected to be significantly higher this year due to a lawsuit filed by Norwegian technology and robotics manufacturing company AutoStore against Ocado over alleged patent infringement.
Ocado said: “Having analysed the claims, we remain of the view that we do not infringe any valid AutoStore rights.”
Shares fell 3 per cent despite the earnings boost.
Additional reporting by Press Association
