Ocado full-year earnings 2024: what to watch for
Ocado Group is set to announce its full-year results on 27 February, 2025, with investors focused on growth sustainability, partnerships, and the path to profitability.
Ocado's recent performance and key metrics
Ocado has shown strong momentum throughout 2024, with its first-half results revealing a 13% increase in sales to £1.5 billion. This growth was primarily driven by the Ocado Retail joint venture with Marks & Spencer, which posted an impressive 11% revenue increase despite challenging market conditions.
The positive trajectory continued into the third quarter (Q3), with the company reporting a 15.5% increase in revenue to £658 million. This performance prompted management to revise its full-year revenue growth forecast upward to low double digits, signalling confidence in its business model amid an evolving retail landscape.
Customer metrics have been particularly encouraging, with active customers increasing by 10% to 1.06 million. This growth in the customer base has been accompanied by a 14.7% rise in average weekly orders, demonstrating both increased acquisition and improved customer retention strategies.
While these figures paint a positive picture, analysts will be scrutinising the full-year results to determine whether this growth rate is sustainable in an increasingly competitive grocery market. Particular attention will be paid to fourth quarter (Q4) performance and whether the company maintained its momentum during the crucial holiday shopping period.
Challenges in Ocado's UK partnerships
One of the key concerns heading into the earnings announcement is Morrisons' decision to scale back its utilisation of Ocado's technology and services. This strategic shift by one of Ocado's significant UK partners has raised questions about the long-term growth potential of its domestic solutions business.
The partnership restructuring with Morrisons could potentially impact Ocado's revenue streams, as the supermarket chain was one of the early adopters of its Customer Fulfilment Centre (CFC) technology. Investors will be eager to hear management's strategy for mitigating this revenue gap and whether there are plans to expand relationships with other UK retailers.
Ocado's joint venture with Marks & Spencer remains crucial to its UK operations, and any updates on this partnership will be closely watched. The success of this collaboration, now in its fifth year, will be a key indicator of Ocado's ability to maintain profitable relationships with major retailers.
The broader question for investors is whether Ocado's technology remains attractive to UK supermarkets in a post-pandemic environment, where many have developed their own in-house solutions for online order fulfilment and delivery.
International expansion and technology partnerships
Ocado's international solutions business remains a critical focus for investors assessing the company's long-term growth prospects. The company has secured partnerships with major global retailers, including Kroger in the US, Coles in Australia, and Aeon in Japan.
Progress with these international partners will be a key highlight in the earnings report, particularly regarding the rollout of Customer Fulfilment Centres (CFCs). Investors will be looking for updates on construction timelines, operational metrics from existing facilities, and any new partnership announcements that could drive future revenue growth.
The Kroger partnership in the US represents Ocado's largest international opportunity, with plans for multiple CFCs across the country. Any data on the performance of operational US facilities will be crucial for assessing the scalability and profitability of Ocado's international model.
Technology licensing and the ongoing development of Ocado's automation systems also represent significant growth vectors. The company has been investing heavily in next-generation robotics and artificial intelligence to improve the efficiency of its fulfilment solutions, and updates on these initiatives could influence investor sentiment.
Profitability concerns and cost management
Despite impressive revenue growth, Ocado has historically struggled to convert this into consistent profitability. The upcoming earnings announcement will be scrutinised for signs of improvement in this critical area, particularly as the company faces inflationary pressures and rising operational costs.
High capital expenditure remains a significant challenge, with the construction and maintenance of automated warehouses requiring substantial investment. Investors will be looking for evidence of cost efficiencies and improved returns on these investments as facilities mature and reach optimal operational capacity.
Supply chain challenges and increased labour costs have affected retailers globally, and Ocado is not immune to these pressures. Management's commentary on cost control measures and margin improvement strategies will be essential for building confidence in the company's path to sustainable profitability.
Another key metric will be the performance of individual CFCs, particularly those that have been operational for several years. Data showing improving unit economics at mature sites would support the company's claim that its business model becomes increasingly profitable as facilities scale and optimise their operations.
Technology development and innovation
Ocado's competitive advantage lies in its technology and automation capabilities, making ongoing innovation crucial to its long-term success. The upcoming earnings report will likely include updates on the company's technology roadmap and R&D investments.
Recent years have seen the company introduce several innovations, including lighter robots, more energy-efficient facilities, and improved picking algorithms. Progress reports on these initiatives will help investors assess whether Ocado is maintaining its technological edge in the increasingly competitive e-commerce fulfilment space.
The commercialisation of Ocado's technology beyond grocery retail represents another potential growth avenue. The company has begun exploring applications in other sectors, such as general merchandise and fashion, which could significantly expand its addressable market.
Ocado's recent investments in artificial intelligence (AI) and machine learning technology will also be of interest. These technologies could potentially drive significant improvements in operational efficiency, from demand forecasting to route optimisation, further strengthening the company's market position.
What to expect from Ocado's 2024 full-year results
Analysts are forecasting full-year revenue of approximately £3.2 billion, representing year-on-year (YoY) growth of around 14%. The key question will be whether this growth has translated into improved bottom-line performance, with consensus estimates pointing to a reduced but still significant operating loss.
Market reaction will likely hinge on management's guidance for the 2025 financial year, particularly regarding expected revenue growth rates and the timeline for achieving group-wide profitability. Any significant deviation from previous forecasts could trigger volatility in Ocado's share price.
Investors should also watch for updates on cash flow and liquidity positions. With substantial ongoing capital expenditure requirements, Ocado's ability to fund its growth strategy without additional equity raises or debt issuance will be an important consideration for long-term investors.
Given the mixed sentiment surrounding Ocado's business model, the earnings call will be particularly significant. Management's ability to address concerns about partnership stability, technological differentiation, and the path to profitability will be crucial in shaping market perception.
How to trade or invest in Ocado's full-year results
- Do your research on Ocado's business model, recent performance, and market position to understand the factors that could influence its results.
- Choose whether you want to trade or invest based on your financial goals and risk tolerance.
- Open an account with us if you don't already have one.
- Search for Ocado (OCDO) in our platform or app to access pricing information and analytical tools.
- Place your trade based on your analysis of the upcoming results and broader market conditions.
Ocado share price – technical analysis
The best thing that can be said about the Ocado share price at present is that it has stopped going down. For the time being the losses have been halted around 300p, but it remains below the 200-day simple moving average (SMA).
While it rallied in January, it was unable to hold its gains, or move on to challenge the 400p highs from early October last year. For the moment, with support holding at 300p, the outlook appears neutral, but the buyers have yet to seize control.
Ocado chart
Conclusion: what Ocado's results mean for investors
Ocado's full-year results will provide crucial insights into the company's progress on multiple fronts, from retail growth to technology partnerships and operational efficiency. The market will be looking for evidence that Ocado can successfully balance expansion with improved financial performance.
For long-term investors, the key considerations will be whether Ocado can maintain its technological leadership in automated fulfilment solutions and successfully scale its international partnerships. The company's ability to defend its market position against increasing competition from traditional retailers and technology companies will also be critical.
Short-term traders should be prepared for potential volatility around the earnings announcement, as Ocado's shares have historically shown significant price movements in response to quarterly updates and partnership announcements.
Ultimately, Ocado's 2024 results will serve as an important checkpoint in the company's journey from innovative disruptor to established player in the global grocery and e-commerce fulfilment market. Whether it can demonstrate progress toward sustainable profitability while maintaining growth momentum will likely determine investor sentiment in the months ahead.
This information has been prepared by IG, a trading name of IG Markets Ltd and IG Markets South Africa Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
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