Following today’s release of Ocado’s figures for the FY2021/22; Joe Dawson, retail analyst at GlobalData, a leading data and analytics company, offers his view: “After a turbulent year of inflationary headwinds and macroeconomic challenges, Ocado has been one of the losers in the food & grocery market as consumers returned to instore shopping and switched to discount retailers for their food & grocery shopping. Its FY2021/22 retail sales fell 3.8% to £2.2 billion, underperforming the UK food & grocery market which saw overall growth of 1.8% as food inflation rose dramatically in the second half of the year. H1 FY2021/2022 saw a significant decline of 8.3% in retail revenue as it came up against tough comparatives in 2021, when the UK was still experiencing COVID-19 restrictions and the online food & grocery market was booming; and while H2 saw a slight bounce back with 1.4% sales growth, this was still an underperformance compared to the total UK food & grocery market. Group EBITDA for the full year was negative, falling to a loss of £74.1m, leading to a drop in Ocado’s share price by nearly 10% in early trading.
“Being an online pureplay seriously hindered Ocado Retail in FY2021/22, as consumers shifted away from purchasing food & groceries online as consumers’ lives started to return to normal in early 2022, and rising costs led to consumers seeing grocery delivery as a luxury rather than a necessity. The retailer was also affected by its mass market positioning, with a reputation for higher prices that will have forced some shoppers trade down from the retailer. While the total number of active Ocado customers increased 13.0% year on year to 940,000, growth was restricted by both average basket value and average basket size falling 8.5% and 11.5% respectively as consumers returned to physical stores for the bulk of their shopping. These declines came despite Ocado’s average selling price rising 4.5% year on year, as grocery supply chains were seriously affected by high inflation driving up costs for suppliers and retailers alike.
“When compared to the performance of other food & grocery retailers, the disparity between online grocery retail and supermarkets and discounters is evident, with Tesco, Aldi, and Lidl faring especially well in 2022. The future of online grocery retail is unclear, and seeds of doubt have been sown as to whether the market will grow in the fashion expected after its popularity during the pandemic. Ocado Retail’s continued investment in its customer fulfilment centres and Zoom, its q-commerce proposition, will provide new avenues for growth in the coming years, but only time will tell if the online retailer will regain market share as consumers become more financially confident.”
