* Erith plant had fire on July 16
* Third quarter revenue fell 10.6%
* Estimated lost 300,000 customer orders
* Ocado shares down 2.7%, M&S down 0.3%
(Adds comments from Ocado Retail chairman, shares)
By James Davey
LONDON, Sept 14 (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) in lost revenue.
Ocado Retail is a joint venture between Ocado Group
and Marks & Spencer.
Shares in Ocado Group were down 2.7% at 0925 GMT and shares
in M&S were down 0.3% after the JV followed other retailers in
highlighting the rising costs of labour, particularly for large
goods vehicles (LGV) and delivery drivers.
Though the Erith fire on July 16, caused by a collision of
robots, damaged less than 1% of the warehouse's grid system, it
was the second major blaze Ocado has suffered in the past three
years.
A fire destroyed its robotic warehouse in Andover, southern
England, in 2019, requiring a total rebuild.
Ocado Retail Chairman Tim Steiner told reporters changes had
been made to robots at the Erith site following the fire.
"Everyone is reassured that the lessons of Andover were well
learnt, that Erith was well contained and that we can eliminate
what caused the Erith fire to never happen again," he told
reporters.
Ocado Retail's revenue fell 10.6% to 517.5 million pounds
($716 million) in its third quarter to Aug. 29. Revenue had
grown 19.8% in its first half.
The JV said that over the first six weeks of the quarter it
had performed in line with expectations, with revenue down 1.8%,
reflecting strong comparative numbers with last year when
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 said higher labour costs may result in an up to
5 million pound 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.
"We are looking forward to another bumper Christmas and an
exciting year of growth in 2022," Ocado Retail CEO Melanie Smith
said.
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)
Marks & Spencer (MKS)
Ocado (OCDO)
