Ocado faces £5m hit to pay drivers higher wages and signing-on bonuses

Tuesday 14th September 2021 12:00 BST

The disclosure by the online grocery retailer comes as the industry faces a major shortage of workers for driver roles, blamed on factors including the pandemic and Brexit.

Ocado said the rising cost of labour, particularly for lorry and delivery drivers, was "an increasingly important issue for the industry" and the pay rises would result in a hit of up to £5m to its full-year results.

The retailer joined supermarket Morrisons in calling for the government to add HGV drivers to the skilled shortage list - which eases immigration for those in specified sectors - to try to ease the shortfall.

Chairman and co-founder Tim Steiner said: "We wouldn't want the shortage to be addressed by putting unqualified or dangerous drivers on the road, but we do need as a country to address the shortage."

Meanwhile, the group estimates that it will face £10m in operating losses plus a £10m cost for stock and asset write-offs after a fire at its customer fulfilment centre in Erith, south east London.

A total of around 300,000, or £35m in revenue, is estimated to have been lost as a result of the blaze.

The fire was largely responsible for a 10.6% fall in sales for Ocado for the three months to 29 August.

However, the retailer also faced comparisons with an "exceptionally strong" period in the earlier stages of the pandemic a year ago.

Ocado said revenues were still 38% above the same period in 2019, before the pandemic.

The business - a tie-up with Marks & Spencer after Ocado ditched previous partner Waitrose - also added 64,000 customers taking the total to 805,000.

But while order numbers grew by 22%, the average spend had "continued to normalise", falling to £124 from £141 a year ago, Ocado said.

It said it expected strong revenue growth ahead and announced that it will open new customer fulfilment centres in Luton and Bicester.

Mr Steiner said: "Despite the challenges we faced in the period, I am delighted to report that Ocado Retail is performing well, improving the customer experience even further and continuing to grow the business in a post-lockdown environment."

Commenting on the results, Sophie Lund-Yates, equity analyst at Hargreaves Lansdown, said a failure to plug the gap left by HGV driver shortages would impact sales performance.

She added: "Ocado prides itself on being a more premium grocer - if it can't get enough of the right stock on its virtual shelves, it could reduce revenue, more so than for other supermarkets."

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