UK’s Ocado Retail lost 35 million stg in orders from warehouse fire

By James Davey LONDON (Reuters) -British online supermarket Ocado Retail said on Tuesday a July fire at its largest automated warehouse in Erith, southeast London, cost it around 35 million pounds (£48.5 million) of revenue in its latest quarter. It was the second major fire Ocado has suffered in the past three years.

A huge blaze destroyed its robotic warehouse in Andover, southern England, in 2019, requiring a total rebuild. The Erith fire on July 16 damaged less than 1% of the warehouse’s grid system. Ocado Retail, a joint venture between Ocado Group and Marks & Spencer, said revenue fell 10.6% to 517.5 million pounds (£716 million) in its third quarter to Aug.

29 versus 578.8 million pounds in the same quarter last year. Revenue had grown 19.8% in its first half. Shares in Ocado Group were down 4% at 0717 GMT while M&S shares were up 0.5%.

Ocado Retail said that over the first six weeks of the quarter it performed in line with expectations, with revenue down 1.8%, reflecting strong comparative numbers with last year when ongoing COVID-19 pandemic restrictions drove demand. However, in the seven weeks after the fire revenue declined by 19%. Taking account of the benefit of increased capacity at its other warehouses, Ocado Retail estimated it lost around 300,000 customer orders due to the disruption.

Operating losses during the second half due to the business interruption were forecast at around 10 million pounds as Erith ramps back up to full capacity. The impact of stock and fixed asset write-offs and other incremental costs associated with the fire were estimated at around 10 million pounds. Ocado Retail also highlighted the rising costs of labour, particularly for delivery and truck drivers.

It said that may result in an up to 5 million pounds hit to full-year numbers, reflecting higher hourly pay rates and signing-on bonuses. The JV forecast “strong” revenue growth in its 2021-22 year, benefiting from a full year of capacity contribution from new warehouses at Bristol, the re-built Andover and Purfleet and the forthcoming opening of Bicester.
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“We are looking forward to another bumper Christmas and an exciting year of growth in 2022,” said Ocado Retail CEO Melanie Smith. An additional warehouse, or customer fulfillment centre (CFC) as Ocado calls them, will open over 2022-23 in Luton, extending capacity to 700,000 orders per week. (£1 = 0.7220 pounds)

(Reporting by James Davey; editing by Michael Holden, Kate Holton and Emelia Sithole-Matarise)