Ocado To Profit from Online Shopping Growth Despite H1 Loss

Advisory costs related to a distribution deal with supermarket chain Morrisons and the opening of new warehouses cost online grocer Ocado its half yearly profit. On Tuesday, Ocado reported a loss of £3.8m (€4.4m , $5.7m) for the 24 weeks to 19 May even as sales rose 15.6% to £355.9m.

The company had earned a pre-tax profit of £0.2m in the first half of 2012. Ocado's stock was trading 3.78% lower at 12:38 pm in London. The benchmark FTSE 100 was down 0.39% at 12:43 pm.

Ocado's chief executive Tim Steiner said it had been an "extremely busy" first six months, during which period the company added new customers just as the average order size increased 1.6% to £114.90.

"We remain well placed to take advantage of the accelerating structural changes in the industry as more customers choose online delivery for their grocery shopping," he said.

"(The Morrisons deal) reflects the growing shift we are seeing in favour of online grocery shopping in the UK and internationally and a validation of the unique technology, IP and operating model pioneered by Ocado to exploit this growing channel. The positive financial impact of this agreement and the endorsement of our business model, positions us well for future strategic developments," Steiner said in a statement.

Ocado now has 3.60,000 customers, up from 3.37,000 a year ago, the company statement said. The company was founded in 2000 by three former Goldman Sachs bankers.

It has not reported an annual pre-tax profit so far.

In January, the company opened a non-food distribution centre in Welwyn Garden City, Hertfordshire. The facility is expected to support the firm's longer-term growth in the non-food product range. Ocado sells 31,000 products.

In April, it opened a second warehouse in Dordon, Warwickshire, inaugurated by Prime Minister David Cameron.

Morrisons, the UK's fourth largest supermarket chain, announced in May that it will roll out an online shopping platform in January, 2014 with technological support from Ocado.

Tesco is the UK's largest online grocer. The company rolled out its online retail platform Tesco.com way back in 1996 and has an estimated turnover of more than £2.3bn.

In 2012, Sainsbury's overtookAsda to become the UK's second largest online grocer, reporting annual sales of about £1bn. Other competitors include Waitrose, the Co-operative Group, Iceland and Marks and Spencers.