Ocado cuts losses by £13m through improved logistics

Online grocery retailer Ocado's improved van utilisation and focus on logistics has contributed to the company cutting its losses by £13m, and making its first-ever quarterly profit.

Ocado has praised a 10% rise in average deliveries per van each week to 133 in its operational highlights for the year ended 28 November 2010, in which it recorded a pre-tax loss of £12.2m, compared to a loss of £25.5m in 2009.

Despite distribution costs jumping 20% to £132.8m during the period, including a 23% rise in trunking and delivery costs, Ocado says the rise was in line with its plans for the progress of its logistics operations.

Operational headcount, including van and HGV drivers, rose 21.7% to 3,835, compared to 3,151 in 2009.

An investment in upgrading telematics and the van fleet was also made, and led to the rise in drops per van per week, the retailer says. In the most productive week of the year, the operator achieved 159 drops per van.

Deliveries on time, or early, also increased to 94.9% from 93% the previous year.

Meanwhile in July 2010, Ocado floated on the stock market to raise capital for a new Midlands DC, and in October it acquired a site near Tamworth for a new £210m DC, which will create 2,000 jobs. It also purchased a smaller £80m DC facility in Bristol, expected to be operational by March 2011.

The preliminary results also reveal Ocado's revenue soared 28% to £515.7m from £401.9m, while the business made its first-ever quarterly profit, generating £300,000 in the three months to 28 November.

Tim Steiner, CEO of Ocado, says: "This was a landmark year for Ocado, with gross sales up 29% for the year - we have delivered on targets set out at the flotation. We have continued our focus on improving the customer offer, which has led to a record number of customers. Ocado's growth continues to outpace the market."