Ocado warns of setback after 'substantial' fire damage

(c) Sky News 2019: <a href="http://news.sky.com/story/ocado-warns-of-setback-after-substantial-fire-damage-11629507">Ocado warns of setback after 'substantial' fire damage</a>

Ocado said a fire at one of its automated warehouses has caused "substantial damage" and will hold back its ability to meet growing customer demand.

Shares (Berlin: DI6.BE - news) in the online grocer fell 7% after it warned that the blaze at its Andover site in Hampshire, which represents 10% of its current capacity, would mean a reduction in sales growth.

The stock was 6.3% down by the close of trading.

Ocado said the fire, which began in the early hours of Tuesday morning, had not been contained as initially believed and later expanded.

In an update issued to the stock market on Wednesday, the company said it had now been informed by the fire brigade that the blaze was under control.

But it said that during the night part of the roof collapsed and that there had been "substantial damage to the majority of the building and its contents".

Ocado said no workers or members of the public had been injured and that it was grateful to the emergency services.

Hampshire Fire and Rescue Service said four of its firefighters had been treated for slight smoke inhalation.

Ocado said it had comprehensive insurance for the property, stock and equipment on site, and for business interruption losses.

But the company added: "As Andover was providing approximately 10% of our current capacity, as a result of this incident there will be a constraint on our ability to meet growing customer demand and there will be a reduction in sales growth until we can increase capacity elsewhere."

Laith Khalaf, senior analyst at Hargreaves Lansdown (Frankfurt: DMB.F - news) , said of the update: "The fire is going to be disruptive for Ocado in the immediate future, but shouldn't unduly damage its long term prospects, provided this doesn't prove to be a systemic risk that comes from letting robots run warehouses.

"A large part of Ocado's market value lies in its ability to license out its cutting edge systems to supermarkets across the globe.

"It therefore needs to provide reassurance this is an isolated incident, as well as trying to keep the wheels of the delivery vans turning for UK customers."

A number of customers have used the company's Twitter (Frankfurt: A1W6XZ - news) account to complain about failed deliveries over the period since the blaze broke out, with a standard reply blaming "operational issues".

The Andover site processes up to 65,000 orders per week when operating at full capacity.

The blaze began hours before the company revealed full-year results - which showed revenues climbing 12% to £1.6bn as active customers passed the 700,000 mark but post-tax losses widening to £44m as it continued to plough investment into its systems.