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Ocado Has Higher Losses in Fiscal 2022 Due to Grocery Headwinds

this multichannel retailer’s group revenue was marginally up 0.6%, driven by Ocado Retail.

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Securities In This Article
Marks & Spencer Group PLC
(MKS)

Ocado Group MKS reported fiscal 2022 results with group revenue marginally up 0.6%, driven by Ocado Retail (revenue down 3.8% versus down 2.5% in our model, reflecting the unwinding of coronavirus shopping behavior and accelerated by the cost-of-living crisis in the U.K.) that more than offset strong growth coming from the solutions business (U.K. solutions and logistics up 13% and international solutions up 122%). Ocado Retail’s revenue decline was the result of a lower number of units purchased per basket (to 46 from 52 in 2021, an 11.5% decline), which only partially recovered from the impact of a 4.5% increase in average selling prices (inflation-driven), resulting in smaller average baskets (to GBP 118 from GBP 129 in 2021, an 8.5% decline). On the positive side, active customers continued to grow to 940,000 (up 13%) with the fourth-quarter exit showing stronger conversion to maturity. On international solutions, 12 sites and 38 live modules are now live across partners, up from 4 and 12 respectively in fiscal 2021. On underlying efficiency, units picked per hour, a metric that reflects efficiency in fulfillment centers, improved to 175 from 170 at mature sites, with the average for all Ocado Smart Platform sites now at 184. Drops per van per week, a metric that reflects last-mile delivery efficiency, has declined to 176 from 177, partially reflecting a decision taken by the company to maintain surplus vans to mitigate supply uncertainty (deliveries per van per shift improved by 10% in the first half, but the company didn’t provide a number for the full year). A group EBITDA loss of GBP 74.1 million compares with a profit of GBP 61 million in 2021 and primarily reflects lower scale and cost inflation in Ocado Retail (to GBP 4 million loss from GBP 150.4 million profit in fiscal 2021), with the other two segments reporting largely unchanged EBITDA numbers versus 2021. We maintain our GBX 1,550 fair value estimate and no moat rating for Ocado.

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

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About the Author

Ioannis Pontikis, CFA

Director of Equity Research in Europe
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Ioannis Pontikis, CFA, is a Director of Equity Research in Europe for Morningstar, where he covers European grocers and global food and beverage companies like Tesco, Unilever, Nestle, and Danone, and manages a team of eight analysts across the Financials and Consumer sectors. He also leads Morningstar’s Equity Research Valuation Committee, advancing the firm's valuation methodology through significant projects such as developing new methodologies, refining our valuation model, and enhancing the efficacy of our ratings.

Before joining Morningstar in 2017, Pontikis spent six years on the buy-side, co-managing a $100M long/short equity fund and leading teams in applying machine learning to stock and equity factor selection models. He developed the fund's valuation and risk assessment framework, achieving strong risk-adjusted performance. Prior to this, Pontikis worked at Nestle S.A. in Athens, focusing on financial reporting, budgeting, and auditing proposals to improve processes.

Pontikis research has appeared in numerous media outlets including Bloomberg, CNBC, Reuters, Guardian, Frankfurter Allgemeine Zeitung among others.

Pontikis holds a bachelor’s degree in business administration from the University of Piraeus’s and a master’s degree in accounting and finance from the London School of Economics. He also holds the Chartered Financial Analyst® designation and studying towards an advanced post-masters degree in portfolio and risk management.

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