After years of heavy losses, Ocado is tantalisingly close to making a profit.
This morning, the online grocer reported an annual loss of £600,000 - against losses of £2.4m last year - so it will have to wait at least another year to shift the unfortunate tag of the business to have never made a profit.
Ocado CEO Tim Steiner has pointed out that it took Amazon seven years to turn a profit. For Ocado, it is 11 years and counting.
For some, such as long term critic Panmure analyst Philip Dorgan, the track record on profits should be a warning sign. This morning, Dorgan described 2012 as another difficult year in which it failed to deliver accelerated sales growth and had to raise money.
Others believe Ocado can make a profit or even big profits, so long as it manages to reach a critical mass of sales.
Who is right should be a lot clearer this time next year. Ocado’s new distribution centre, which is due to start processing orders later this month, will give the business the room to grow sales and bring some of the operational efficiencies, crucial to profitability.
Ocado’s house broker Numis believes the facility will allow the business to “accelerate sales growth, drive further operational gearing and deliver on its potential”.
It is a big ask. Given how much vouchering Ocado has done when limited by “capacity constraints” and the strong possibility of teething problems at the new distribution centre, there is good reason to be wary of the optimistic view. Either way, 2013 looks set to be a big year for Ocado.
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