Ocado counts the cost of warehouse fire

Online grocery retailer Ocado has reported a fall of 10.6% in revenues for the last quarter, following severe disruption to operations caused by a fire at its London warehouse.

The drop in revenue contrasts sharply with a 54% increase in the same quarter last year when the firm’s home delivery offering was in high demand during pandemic restrictions. Performance had been strong during the first six weeks of the quarter, but in the seven weeks after the fire at its Erith depot in south east London, revenue fell by 19%.

The incident – which was caused by a collision between automated machinery at the plant – led to cancellation of orders in the week after the fire, and a temporary reduction in delivery capacity to customers for several weeks after that. In total, the company estimates it lost around 300,000 orders as a result of the fire, equating to around £35m in revenue. The direct cost of the fire is reported to be in the region of £10m. It was the third warehouse fire to hit the business in three years, with its major site in Andover, Hampshire, now back in full operation after two years.

Along with most other retailers in the sector, Ocado is also facing increased costs in addressing a shortage of labour, particularly delivery and truck drivers. It has warned that this may mean an additional cost of £5m to this year’s figures based on higher hourly pay rates and sign-on bonus to new recruits.

Tim Steiner, chairman of Ocado Retail, 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. I would like to pay tribute to the efforts of all my colleagues who worked so hard to get Ocado back to business so quickly following the fire in Erith. The success of these efforts demonstrated again the resilience of Ocado and its people.”

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