Ocado’s market value plunged by £600m today as investors grew tired of waiting for jam tomorrow following another year of large losses at the grocery technology group.
Shares crashed by as much as 18% as Ocado revealed a cost-cutting plan to slash hundreds of research & development jobs and trim investment in the division having spent more than £800m in recent years.
A weakening forecast in technology sales did nothing to improve investor sentiment as the group predicted growth of 10% in 2025, down from 18% last year. It came as Ocado recognised that the pace of growth in some markets remained slower than anticipated at the height of the pandemic.
Guidance for the retail joint venture with M&S also signalled a slowdown from the market-leading performance (+13.9%) in 2024 to growth of above 10% this year.
Pre-tax losses in the year to 1 December narrowed to £374.5m, compared with £394m in the prior period, thanks to a strong performance in the retail arm.
Group revenues climbed 14.1% to £3.2bn as Ocado Retail jumped 13.9% to £2.7bn and technology sales rose 18.1% to £497m.
The share price finished the day 16.8% lower at 277.3p. It means Ocado – one of the most shorted stocks on the London market – has suffered a dramatic slump in value over the past five years, with shares down almost 75%.
On today’s price, the group is worth £2.4bn, a long way from its market cap peak of more than £23bn.
“Being a shareholder in Ocado must feel like being kept waiting on a grocery delivery indefinitely as the promised profit never materialises,” said AJ Bell investment director Russ Mould.
“For now, the company continues to chalk up material headline losses as it pledges to turn cashflow positive in the year to November 2026. The longer Ocado goes without generating cash, the more nervous investors are likely to get about the company’s level of borrowings.”
Manjari Dhar at RBC noted Ocado was the only global provider of an end-to-end platform solution for online grocery retailing, which the analyst viewed as “industry leading”. “However, our analysis of the group’s cashflow potential suggests targets appear ambitious,” she added.
“A reduced growth outlook is having significant implications on profitability as capacity is likely to remain ahead of demand in the near term.”
Mould highlighted signs of improvement in the results but said the market reaction suggested patience with the business was running out nearly 15 years on from its IPO.
“Ocado is reaching the point where more radical action is required, whether that involves a new management team being given a shot or hiving off its retail venture with Marks & Spencer,” he added.
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