nline grocer Ocado said its retail grocery arm returned to an underlying profit in recent months – but saw revenues held back as cash-strapped shoppers cut back their spending.
The group’s retail arm, run as a joint venture with Marks & Spencer, posted underlying losses of £2.5 million overall in the six months to May 28, though Ocado said it delivered underlying earnings in each month of the second quarter.
It said there was a “clear pathway” to continue driving underling earnings at the division.
Retail revenues rose by 5% to £1.2 billion as average price inflation of 8.4% was offset by smaller basket sizes – down 6.3% at 45 items – and fewer orders per week as shoppers reduced their spending in the face of soaring cost pressures.
Our operations in the UK remain an important demonstration of the potential for our international ambitions as we seek to transform the economics of online grocery and expand into the wider automated storage and retrieval solutions market
It insisted its increase in average selling prices was below the wider UK grocery inflation at 12.8%, according to industry data from Nielsen.
Ocado said it had begun to see the declines in basket sizes stabilise at 44 items over the second quarter.
Overall across the group, which also includes its international logistics and robotic warehouse operation, Ocado reported widening pre-tax losses of £289.5 million in the first half, against losses of £211.3 million a year ago, including one-off costs of closing its Hatfield warehouse.
It said on an underlying earning basis, it swung to a £16.6 million profit against losses of £13.6 million a year earlier.
Tim Steiner, Ocado chief executive, said: “In the UK, Ocado Logistics had a steady, profitable first half and Ocado Retail is making good progress, with a return to profitability in the second quarter.
“Our operations in the UK remain an important demonstration of the potential for our international ambitions as we seek to transform the economics of online grocery and expand into the wider automated storage and retrieval solutions market.”