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Ocado Retail reveals lost revenue of around £35 million as a result of CFC fire

Ocado Retail has revealed that it suffered lost revenue of around £35 million as a result of the disruption caused by a fire at its customer fulfilment centre in Erith earlier this year.

The fire, which happened on July 16th, saw less than 1% of the grid damaged thanks to a swift response. The CFC was able to commence operations as a spoke, delivering for both Ocado Retail and Morrisons customers, within three days, with orders being fulfilled from the site within a week.

However the disruption caused by the fire saw revenue decline by 19% and around 300,000 orders, or around £35 million in sales lost as a result, the company said. “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,” the company said in its latest trading statement this week. Taking the pre-and post-fire performance of Ocado Retail together, revenue fell 10.6% in the quarter.

Ocado has worked quickly to increase capacity at its CFCs at Hatfield and Dordon, as well as introduce new capacity at CFC 5 in Andover (60k OPW) and CFC 6 in Purfleet (85k OPW), taking total capacity when fully ramped  to just over 600,000 orders per week.

It said that Purfleet and Andover each delivered 10,000 orders in their first full week, with Andover now processing around 20,000 orders per week, the fastest ramp-up of capacity in Ocado’s history. The additional capacity is helping to offset temporary additional safety measures that Ocado has put in place at Erith, with pre-fire capacity to be fully restored by the end of November.

Ocado said it is facing a resulting net cost to Ocado, not covered by insurance, from the fire of around £10m.

It also faces an estimated further £5 million impact to its full-year numbers from rising costs of labour, particularly for LGV and delivery drivers. The figures reflect additional measures being taken to hire new staff including raising hourly rates and offering signing-on bonuses.

Ocado Retail expects to deliver strong revenue growth in FY22 however with a full year of capacity contribution at Bristol, Andover and Purfleet and the forthcoming opening of Bicester. Ocado has also announced additional CFC capacity over 2022-23 with a new CFC planned in Luton (65k OPW) in addition to Bicester (30k OPW), extending total capacity even further to around 700,000 orders per week.

Tim Steiner, chairman of Ocado Retail, said: “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.

“With a market-leading customer offer and technology, we are confident Ocado Retail will continue to grow market share as we help them to roll out even more capacity and we look forward to Christmas and delivering strong growth in the new financial year, with our long-term outlook as compelling as ever,” he said.

Image credits:
  • Doug Peters/PA Wire