Ocado has reported a 40% increase in sales since 1 March as the online grocer benefited from high demand for home deliveries during the coronavirus pandemic.
However, the company does not expect a boost to profits because of additional costs related to managing the crisis, including a 10% bonus for workers, testing delivery drivers for Covid-19 and further investment in IT and infrastructure to meet demand for its services.
Duncan Tatton-Brown, the chief financial officer, said there was uncertainty over whether shoppers would remain keen on home deliveries once the lockdown was eased.
“We are not yet sure when some of the restrictions we have in place will change or the behaviour of customers [beyond] those restrictions or the economic impact [of the lockdown]. There are lots of uncertainties,” he said.
The uncertainty over profits comes as Ocado’s board faces the prospect of protests at its annual shareholder meeting over an £88m bonus payout to directors.
Tatton-Brown said the executives were being rewarded for “exceptional performance” under the bonus scheme, which was approved in 2014.
Since its launch shareholders have seen the value of the company increase by £7.5bn to nearly £12bn. “It is what it is. And I don’t think there is more to say,” he said.
Ocado was not banking a windfall from the surge in online grocery sales, he said, and had not benefited from government assistance such as business rates relief or the delay of VAT payments. The company has not furloughed staff under the government job protection scheme.
“We’ve really done our bit and tried to scale up. If we could have scaled faster we would have done. We will keep trying to do more,” Tatton-Brown said.
Ocado was “outperforming” other supermarkets in offering help to shoppers shielding at home with deliveries to 150,000 vulnerable families, he said. “We know we are serving more than our share.”
Tatton-Brown said Ocado had been able to ramp up its deliveries in the past six weeks by improving efficiency at its warehouse in Dordon, near Birmingham, where it was processing nearly 7.5% more items per member of staff per hour.
It has also increased capacity by 27% at its newest facility in Erith, south London, and accelerated the development of its Zoom same-day delivery service in west London a year earlier than planned.
Efficiency has been helped by customers buying more of the same items – often stocking up for neighbours or family members – while Ocado has trimmed ranges and limited orders on bulky items, such as mineral water, to create more space in its delivery vans.
Tatton-Brown said Ocado had hired engineering contractors to speed up work on its warehouses to help meet demand, including two new sites and the rebuilding of one in Andover, which burned down last year. “We are seeing a lot of extra costs,” he said.
Despite delays caused by the need for safeguarding for construction workers during the pandemic, he said the facilities would be completed on time next year. Ocado expected to begin delivering groceries for its new partner, Marks & Spencer, in the autumn as planned, he added.
The company said it had also enabled the delivery of 40% more groceries in total across Ocado and its partner, Morrisons, which uses one of Ocado’s warehouses as well as its technology to drive picking online orders in stores.
Tatton-Brown said Ocado had not increased prices, aside from dropping multi-buy offers in line with the rest of the market.
He said customers were putting more in their online baskets on each visit. While the amount spent has fallen from the peak in mid-March when families were preparing for lockdown, shoppers are still spending more than usual because they are not dining out and buying sandwiches for lunch.
He said the mix of goods ordered had changed, with the emphasis on pasta, tins and toilet roll in the early days of the pandemic having switched to include more chocolate, wine and other discretionary products.
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