Ocado warns profits to be lower due to extra staffing

Ocado Group

Last Updated at 17 Apr 2014, 11:30 ET *Chart shows local time Ocado Group intraday chart
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Shares in online grocer Ocado have fallen more than 11% after it said profits would be lower than expected.

The firm, which mostly sells Waitrose goods, said it had been working to increase capacity at its main Hatfield depot.

However, the online retailer said its profit margins were hit by production issues and the need to bring on extra staff while this work took place.

The group said it expected gross sales of £643m for the year to 27 November.

"We are encouraged by the operational capacity improvements that we have made," said chief executive Tim Steiner.

"But [we] are disappointed that we did not achieve as large or as early an increase as we had originally planned."

The company said it had reached a peak of 131,881 deliveries a week during the last week of the financial year

However the firm had said it wanted to reach a target of 140,000.

Customer service

Shares in Ocado fell sharply as investors feared profits would be lower than expected and problems at the firm may not be resolved.

It is not the first time the company has had to bring on extra staff to maintain customer service.

"The previous trading update on September 19 also noted further investment in customer service... so investors are likely to question whether this is really just a short-term issue," said analysts at Espirito Santo in a note to investors.

Ocado said work on its new distribution centre in Dordon, Warwickshire, remained on track. It is expected to open next year.

Earlier this year, Waitrose announced it would be expanding its online presence to within the M25 area, potentially threatening Ocado's own business.

Ocado was founded in 2001 by three former Goldman Sachs bankers.

Its shares floated at 180 pence in July 2010, but have since fallen by 65%.

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