UK’s Ocado Focuses on Cashflow as Stocks Soars on Strong H1 Earnings

UK online supermarket and tech group Ocado says it is prioritizing cash generation in the next financial year, Reuters reported. Ocado’s cash flow announcement came as the high-spending group reported a 77% increase in its first half earnings. 

Ocado stocks rose by close to 13% after the retail tech company reported £674 million in total revenue for the first half ending June 1. This represented a 13.2% increase compared to the same period last year.  

Revenue Drivers

Ocado Q1 H1 earnings included £611.8 million in pre-tax profit for the half-year. This represented a significant rebound from a £153.3 million loss reported the previous year. Ocado’s revenue rise was supported by significant growth in the company’s tech business. Expansion of this unit and additional investment caused this unit to grow by 14.9%. 

Another factor that drove revenues for the UK online firm is the Ocado M&S Joint Venture, a retail business whose half year revenue rose by 16.3%. The company reported a 14.7% increase in orders, which stood at 491,000 per week. Ocado also benefited from rising revenues from its third-party logistics business. 

From this enterprise, the company reported a 12.1% growth in revenues. Ocado also reported growth in average customer numbers. The digital retailer said its customer base grew by 13.4% and the frequency with which shoppers placed orders also increased.

“Ocado Group has delivered a strong first half and we have reached important milestones both in our UK business, as well as across our international partnerships. Our technology solutions division has more than doubled Ebitda (earnings before interest, tax, depreciation and amortisation) and our underlying cash flow has improved significantly, ending the period with liquidity in excess of £1 billion,” Ocado Chief Executive Tim Steiner said. 

Turning Cashflow Positive

Although Ocado operates a digital supermarket in a joint venture with Marks & Spencer, its market value is largely driven by revenue from its robotic warehouse technology unit. The tech group said its main priority is to shift its cash flow to positive in the 2025/26 financial year starting in December. 

“Our focus remains on turning cash flow positive during full-year 2026, supported by continued growth with our partners and cost discipline across the business,” Steiner added. 

Ocado’s financial turnaround strategy includes cost reduction. The company’s Chief Finance Officer Stephen Daintith said Ocado was on the path to realizing this change. Daintith said a cashflow that’s £93 million lower in the first half of the year compared to the same period a year ago, a reducing cost base, and a 15% revenue growth in the company’s critical tech division have placed the company squarely on the profitability path. 

Ocado Partner Expansion Slowdown

Ocado has been experiencing challenges executing its expansion strategy. In the period under review, Ocado’s US partner, Kroger slowed down in rolling out automated customer fulfillment centers. Last year, the company faced similar challenges after its partner in Canada, Sobeys halted plans to open a fourth warehouse. 

However, the British retailer expanded its partnership with Bon Preu, a supermarket group in Spain last month. Ocado is also planning to open 8 more customer fulfillment centers in the coming three years. 

Steiner said the online retailer will be onboarding new grocery customers as exclusivity terms with current partners in various markets lapse towards the end of 2025. But analysts worry that this could paint the retailer in a negative light. 

“This may not be helpful to some of the long-term relationships or could be seen as a sign that the partnerships have deteriorated to a point where there is little chance of improvement,” Bernstein Analyst William Woods said.