Shares in Ocado (LON:OCDO) hit a 10-year low after its H1 results and FY outlook disappointed investors. The firm swung to a loss in H1, from a substantial prior-year profit, while its FY outlook undershot expectations.
From profit to loss
For the six months to May, excluding monies from Kroger and Sobeys, revenue rose just 1% to £684 million. Within that, Technology Solutions revenue fell 8% to £256 million while Logistics revenue rose 8% to £428 million.
Operating profit at Technology Solutions shrank 18% to £60 million, while at Logistics it rose 15% to £22 million. At the group level, operating profit was down 11% at £82 million, while at the pre-tax level the group swung from a profit of £607 million to a loss of £208 million.
The Ocado Retail business, which is 50/50 joint owned with Marks & Spencer (LON:MKS), reported a 15% increase in revenue. Thanks to tight cost control, the business generated EBITDA of £73 million against £33 million in 1H25.
For the full year, the group forecast Technology Solutions revenue of around £500 million or roughly double the H1 result. This was 10% short of market expectations, while the divisional operating profit target of £150 million was 15% below estimates.
Ocado has always pitched itself as a technology company, and there’s undoubtedly some clever tech at its heart. However, it’s been a terrible investment because it always overpromises and underdelivers. The shares are at their lowest since the early 2010s meaning anyone who bought them in the last decade has lost money.
Charles Allen, senior retail analyst at Bloomberg Intelligence, called Ocado’s prospects for installing more robot-driven warehouses ‘anaemic’. The irony is the actual retail business is on fire, as evidenced by the monthly till roll data from Worldpanel. The firm has posted double-digit growth every month for over a year, but the benefits are lost in the mix.
For us, the obvious way to play the success of Ocado Retail is through joint owner M&S. Although not classed as a food retailer by Worldpanel, two thirds of sales are food which is fine with us.
Read the press release here: https://www.ocadogroup.com/investors
