Ocado has said shopping habits have changed “for good” as it revealed annual earnings soared 69% after demand for online grocery shopping rocketed amid the pandemic.
The online grocer posted underlying group earnings of £73.1 million for the year to November 29, up from £43.3 million the previous year, as revenues rose a third to £2.3 billion.
Earnings in its retail arm, a joint venture with Marks & Spencer, more than trebled to £148.5 million, up from £40.6 million the previous year, on sales up 35.3%.
On a bottom-line basis, it narrowed pre-tax losses to £44 million from £214.5 million as the online shopping boom helped offset heavy investment.
Chief executive Tim Steiner said: “The rapid acceleration of many pre-existing trends in business and society has been a feature of the Covid-19 crisis and the dramatic channel shift in grocery is a clear example of this.
“The landscape for food retailing is changing, for good.”
He dismissed calls for an online sales tax following Tesco’s plea for the Chancellor to introduce a 1% levy for internet competitors as “wholly inappropriate”.
Mr Steiner said: “I don’t think it’s appropriate for anyone to put a sales tax on a retailer because they operate from different premises or are an efficient operator.”
On calls for a windfall tax for those sectors that have benefited amid the pandemic, he added: “People who make profits generate taxes.”
Ocado pledged to invest an extra £30 million in technology to meet the surging demand during the pandemic and said it is hiring another 600 staff in its IT division, after taking on 500 in 2019-20.
But it warned that retail sales growth over the current year is dependent on Covid-19 restrictions as it said the pandemic will continue to have a “significant impact on group performance”.
It said the planned opening of three new high-tech warehouses will support greater availability of delivery slots for customers while it is also set to ramp up the rollout of its new Zoom rapid same-day service within London and inside the M25.
The group’s first Zoom site is full, with a second secured and it is on the lookout for another 12.
Ocado’s results showed that its average basket value jumped to £137 from £106 due to the surge in demand.
The figures also revealed that its UK solutions and logistics division, which provides services to the Ocado and M&S joint venture, alongside a contract with Morrisons, saw underlying profits fall 38.4% to £44.4 million.
But sales at the division rose by 13.6% over the year.
The firm added that legal costs are expected to be significantly higher this financial year due to a lawsuit filed by Norwegian technology and robotics manufacturing company AutoStore against Ocado over alleged patent infringement.
Ocado said: “Having analysed the claims, we remain of the view that we do not infringe any valid AutoStore rights.”
Shares fell 3% despite the earnings boost.
John Moore, senior investment manager at Brewin Dolphin, said: “Ocado has redoubled its commitment to heavily invest in its offering, seeking faster growth through new capacity and technology innovation – while this is yet to translate into profit, it places the business very well for the future.”