Losses at British e-commerce and technology group Ocado (LON: OCDO) rose sharply last year despite rising revenues. Investments in technological retail solutions weighed on earnings.
Rising Costs
Ocado’s total revenue increased by 7.2% to reach £2.5 billion. Retail revenue climbed 4.6% in 2021 to £2.29 billion, while International Solutions revenues quadrupled to £66.6 million.
Revenue for UK Solutions & Logistics increased by 8.6% to reach £710.4 million.
Last year, the company opened five new fulfillment centers for overseas customers, including the first two in the United States.
However, costs increased even more than revenue: distribution and administrative costs increased by 20%, as Ocado invested heavily in technological solutions for its retail customers and in the expansion of support functions.
Ocado ended the year with a statutory loss before tax of £176.9 million, more than three times higher than the previous year.
CEO Commentary
Ocado Group CEO Tim Steiner said, “The past year has further reinforced that demand for online grocery is here to stay. In the majority of mature markets, the fastest growing channel is online and to truly win here food retailers need to deliver the best offer with the best economics across all customer missions. The innovation that is powering the development of the unique and proprietary Ocado Smart Platform is focused on providing an unequalled customer experience through ground-breaking technology which leads to an unrivalled low cost operation.”
Wall Street’s Take
Following the results, J.P. Morgan analyst Marcus Diebel kept a Hold rating on OCDO with a 1,550p price target. This implies 20.2% upside potential.
The rest of the Street is cautiously optimistic on OCDO with a Moderate Buy consensus rating based on three Buys, two Holds, and one Sell. The average Ocado Group price target of 1,844.58p implies 43.1% upside potential to current levels.
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