Last checked at 
(Alliance News) - Ocado Group PLC on Tuesday said revenue in its retail joint venture with Marks & Spencer Group PLC fell in the third quarter after the fire at one of its distribution centres, and warned of rising labour costs.
Revenue at Ocado Retail dropped 11% in the third quarter of the financial year ending November 30, to GBP517.5 million from GBP578.8 million a year before. Average orders per week rose 1.4% to 338,000 from 333,000 a year earlier. Compared to the third quarter of 2019, revenue increased 38%, Ocado said.
Shares in Ocado were down 2.5% to 1,838.00 pence in London on Tuesday morning. M&S shares were down 0.1% at 188.30p.
"Over the first 6 weeks of the quarter, the business was performing in line with expectations, with revenue marginally down 1.8%," Ocado said. The firm was up against strong comparatives from a year earlier, when more virus restrictions were in force, benefiting the online-only grocer.
But revenue was then hit by a fire at a customer fulfilment centre in London on July 16, which disrupted orders.
"In the remaining seven weeks of the quarter, and due to the disruption caused by the fire, revenue declined by 19%. In addition to the need to cancel orders in the week following the fire, the temporary reduction in capacity reduced our ability to offer slots to new customers," Ocado said.
The disruption cost Ocado Retail around GBP35 million in sales, it said. The unit's operating loss in the second half is estimated to be around GBP10 million, which will "adversely impact" earnings before interest, tax, depreciation and amortisation in the 2021 financial year. Write-offs because of the fire will cost an additional GBP10 million.
It was the second major fire at an Ocado warehouse in three years, after the Andover fulfilment centre in Hampshire was destroyed by a four-day blaze in February 2019. That was rebuilt and then reopened last month.
The company also flagged rising labour costs, particularly for lorry and van drivers, as a nationwide shortage creates supply chain problems across the industry.
That will cause an extra GBP5 million hit to full-year results, as Ocado raised hourly rates and offered signing-on bonuses to drivers.
But the company offered a note of optimism, saying it expects strong revenue growth for Ocado Retail in financial 2022. The firm announced it plans to build a new fulfilment centre in Luton, which would add 65,000 orders per week in capacity.
Separately on Tuesday, market research firm Kantar said Ocado's sales declined by 1.5% on a year before in the 12 weeks to September 5, though were still up 42% from two years ago. Its UK market was unchanged at 1.8%.
By Ivan Edwards; ivanedwards@alliancenews.com
Copyright 2021 Alliance News Limited. All Rights Reserved.
