Warehouse Fire Costs Ocado About $50 Million in Lost Sales
(Bloomberg) -- A warehouse fire in July cost Ocado Group Plc’s online grocery joint venture with Marks & Spencer Group Plc about 35 million pounds ($50 million) in lost revenue.
Sales fell 11% in the quarter through August, as the company also suffered from a nationwide truckdriver shortage and lower demand as workers returned to the office. The unprofitable company said Tuesday that it expects disruption from the fire to lead to additional operating losses of about 10 million pounds.
Shares in Ocado fell as much as 6.8% to the lowest in more than a year.
The July blaze was the second serious fire at one of Ocado’s automated warehouses in the past three years, and it comes after Ocado joined forces with Marks & Spencer’s online activities in 2019. The logistics issues compounded problems coming from a serious shortage of truck drivers for months now after thousands of drivers returned to the European Union following Brexit. The impact has led to shortages of some products in some British supermarkets, which could potentially get worse as the busy Christmas period nears.
What Bloomberg Intelligence Says:
Delivery driver shortages, causing wage rises, are a particular issue for Ocado and a 5 million-pound reason, together with the latest sales shortfall, for likely downgrades in consensus Ebitda.
Ocado Faces Delivery-Cost Pressure as Sales Lost to Fire: React
Charles Allen, BI retail analyst
Ocado said it expects the truckdriver shortage in Britain will reduce full-year numbers by another 5 million pounds. The higher costs are a result of raising hourly wages and offering sign-on bonuses to try and attract more staff.
Before the fire at a warehouse in Erith, England, revenue was only marginally down against a strong comparative quarter last year, when more people were eating meals in the home. However, after the fire, revenue declined by 19% in the remaining seven weeks of the quarter.
Despite the challenges, Ocado said it still expects the U.K. retail arm to deliver strong revenue growth for the year.
The company has opened three new automated warehouses in the U.K. this year, which should help improve logistics. It also announced plans Tuesday to open an extra warehouse in Luton in the south of England.
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