Ocado Retail takes £35m sales hit after Erith warehouse fire, and sets aside money for higher driver wages

·2-min read
Bags from the home delivery company Ocado (PA Archive)
Bags from the home delivery company Ocado (PA Archive)

Ocado has moved to try and tackle a delivery driver shortage, with the online supermarket putting aside up to £5 million that could be used towards higher wages and bonuses.

Shares in FTSE 100 company Ocado declined 52.5p to 1833p as it updated on the potentially higher costs alongside reporting a fall in third quarter sales and revealing £35 million in revenues were lost at its joint venture due to a fire.

Ocado Retail, a joint venture between Ocado Group and Marks & Spencer, recorded a 10.6% fall in revenue in the 13 weeks to August 29, compared with a 54% surge seen a year earlier when customers were stockpiling goods during the pandemic.

However, the performance was still 38% above the same period pre-Covid in 2019.

The latest third quarter decline was deeper in the last seven weeks of the quarter following a July 16 fire at the firm’s Erith warehouse which caused disruption and resulted in lost revenue of around £35 million.

Meanwhile, a combination of the ‘pingdemic’ causing disruption, driving test backlogs and some workers leaving the UK after Brexit has led to a major shortfall in HGV drivers, currently around 100,000. It is impacting numerous businesses.

Ocado Retail said: “Rising costs of labour, particularly for LGV and delivery drivers represent an increasingly important issue for the industry that may result in up to £5 million of impact to full year numbers.”

The firm said that reflects additional measures being taken to hire new staff including raising hourly rates and offering signing-on bonuses.

It added: “We will be working to mitigate these costs as best we can.”

The company added that operating losses as a result of the fire are estimated to be around £20 million for the second half, of which around half will be covered by insurance.

Ocado Retail said it expects to deliver strong revenue growth in the next financial year, “with a full year of capacity contribution at Bristol, Andover and Purfleet and the forthcoming opening of Bicester”.

It intends to increase capacity even further with a new distribution site planned in Luton.

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