Ocado chief defends long term strategy against short term profit obsession

The City’s fixation on short-term profits is misguided, according to Ocado Group’s chief executive, Tim Steiner. The grocery and technology group’s head has urged investors to adopt a longer-term perspective as the company continues to prioritise technological innovation and scaling over immediate profitability.

Ocado, co-founded in 2000 by former Goldman Sachs employees, has faced criticism over its financial performance, achieving a full-year pre-tax profit only once in its 25-year history. Steiner acknowledged the scepticism but emphasised that the company’s strategy required patience. He stated, “Our shareholders should only have invested if they believe that in the long term we’re going to be a profitable business.”

The company’s valuation plummeted from £22 billion during the pandemic to £2 billion last year, pushing it out of the FTSE 100. Critics, such as former Tesco boss Sir Terry Leahy, have labelled the business a “charity” due to its appetite for considerable losses, yet Steiner remains confident in Ocado’s potential. He highlighted that significant investments in automation, robotics, and software over recent years position the firm more as a technology leader than a simple grocery retailer.

Despite turbulent financials, Ocado’s outlook appears brighter. For the first six months of the year, the group saw an impressive 16.3 per cent rise in revenue from its retail joint venture with Marks & Spencer, reaching £1.5 billion. The increase was fuelled by greater customer activity and higher average basket values, though the number of items per sale declined slightly. Notably, Ocado Retail narrowed its operating loss from £25.7 million to £17.1 million during the period.

Group revenues climbed 13.2 per cent to £674 million, buoyed by a 14.9 per cent growth in its technology division and a 12.1 per cent rise in third-party logistics revenue. Steiner, who recently stepped in as interim chief of Ocado Solutions, cited improving sentiment among supermarket clients despite global economic uncertainties. He noted that automation and technological solutions are increasingly being sought as retailers look to reduce costs and improve efficiency.

Ocado also announced its revised timeline for achieving cash-flow positivity by 2027, with full-year profitability expected shortly thereafter. Although this shift extends earlier projections set for 2023, progress in the firm’s technology arm and broader product offerings has reassured many. Shares in Ocado surged following the announcement, closing up 18.5 per cent at 279p even as its stock remains down by 25 per cent over the past year.

Critics argue the enthusiasm should remain measured, with long-term detractors like Clive Black of Shore Capital voicing scepticism over the viability of Ocado’s business model. For Steiner, however, the focus remains clear – building a long-term, sustainable business driven by innovation and global partnerships through technology.