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Ocado warehouse fire is ‘temporary setback’, claims CEO

Ocado warehouse fire

Ocado’s share price has risen to an all-time high after revealing the impact of a fire at its Andover warehouse last month.

In a trading update the online grocer said the fire had cut sales by 1.2% in the quarter, meaning retail revenue grew 11.2% to £404 million. The company’s share price rose 7% on the news.

Its average orders per week were up 11.3% while the order size fell 0.2% to £110.24.

The fire broke out at Ocado’s Andover site in early February. Until the fire Andover had been fulfilling around 10% of Ocado’s orders, suggesting that the grocer has managed to reroute a significant proportion of orders through other sites to sustain growth.

Ocado also said it had ramped up capacity at its site in Erith, which since December has seen capacity increase from 30,000 to 37,000.

The Andover facility opened at the end of 2016, choosing the site because of its direct access to the A303, while Erith, near the M25, opened in mid-2018. Ocado established its first site in 2001 in Hatfield and its second in 2013 in Dordon.

The grocer has set up a temporary site in Andover and plans to build a “state-of-the-art” replacement facility.

The company is still investigating the causes of the fire but said in a statement it currently believed there were “no significant implications for the risk profile of the assets or the viability of our model”. It specified that it would not impact either the retail or the technology business.

Tim Steiner, Ocado’s CEO said: “Our first quarter was characterised by continued strong underlying growth in Ocado Retail but also the initial impact of the fire at our CFC in Andover on our headline numbers

“The fire has been a setback, but it will be only a temporary one.

“At the same time we all remain focused on delivering customers the very best service, quality, choice and value. Our commitment to these objectives underpinned the underlying progress we made in the quarter.

“With the Joint Venture signed with M&S at the end of February, Ocado Retail has never been in a stronger position to lead channel shift while constantly setting the bar for excellence in online grocery in the UK.”

Last month saw M&S and Ocado create a 50-50 joint venture which aims to combine brand strength with fast delivery. Following the expiry of the Waitrose sourcing deal in 2020, Ocado’s UK retail business will sell M&S’s product range.