Online food retailer Ocado has raised its full-year profit forecast, cementing its position as one of the corporate winners from a pandemic that has driven more people to shop online.
The UK company, which sells its technology to US-based Kroger and other supermarket groups, on Monday said it expected earnings before interest, taxes, depreciation and amortisation to be about £60m in the year to November. That was up from previous guidance of £40m, which was issued less than two months ago.
Tim Steiner, the group’s chief executive, said the company was continuing to trade at “peak volumes every day” and that confirmation of a second lockdown in the UK had sent the size of average orders “creeping back up”.
Ocado’s chief financial officer, Duncan Tatton-Brown, said the earnings upgrade was directly associated with the pandemic, rather than changes in the company’s capacity or pricing. “Most of the country had hoped the effects of the pandemic would have mitigated by now, but that has not been the case,” he said.
The coronavirus crisis has turned Ocado into one of the top performers on the UK stock market. Its share price, which was up by almost 10 per cent on Monday morning, has more than doubled since March.
Separately on Monday, Ocado said it had agreed to buy San Francisco-based robotics company, Kindred Systems, for $262m. The US group, which has about 90 employees, develops artificial intelligence systems used to pick and pack online orders. Ocado said it was also paying $25m for Haddington Dynamics, which is based in Las Vegas and makes robotic arms.
“If you’re building warehouses with us, you should expect that you’ll need to hire less people,” Mr Steiner said about the group’s new technology. “In two to three years, the majority of people [picking goods at warehouses operated by Ocado technology] will be able to be replaced by robotics,” he said, adding that the company was not planning redundancies among its existing staff.
Ocado has focused its ecommerce business on groceries, which Mr Steiner called the “hardest and biggest market” as opposed to other categories such as fashion. But through its acquisition of Kindred, the company will inherit so-called general merchandise customers such as clothing retailer Gap, which Mr Steiner said “opens up opportunities”.
The group said its joint venture with Marks and Spencer, Ocado Retail, enjoyed a strong performance in the final quarter of the year. It expected the acquisitions to boost full-year revenues in 2021 by £30m with a “small” negative hit to earnings.
Ocado was last month accused of infringing robot technology patents by AutoStore, a Norwegian developer of warehouse automation systems. The retailer has denied the accusations and said it was investigating whether AutoStore “has or intends to” infringe on its patents.