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Ocado has revealed plans to scale back its research and development workforce in the UK and globally as it remained loss-making last year despite a resurgent performance from its online retail arm.
The group, which runs robotic warehouses for other chains alongside its Ocado Retail business as a joint venture with M&S, said it was trimming investment on R&D to cut costs, having spent more than £800m in this area over the past four years.
Chief executive Tim Steiner declined to say how many jobs would be going, but said it would be “significantly” less than the 1,000 group-wide redundancies made in 2023-24. “The cost reductions we’re looking at are a low single-digit percentage of our global workforce,” he said.
Shares in the firm tumbled as much as 18 per cent in morning trading on Thursday on its outlook for lower growth in its technology solutions business.
The London Stock Exchange-listed company had a market capitalisation of around £2.8bn – which has then dropped by around £600m in trading by 10:30am GMT – and is comfortably the biggest faller of the day in the FTSE 250.
“There are some signs of improvement in the latest results. Losses are narrower and revenue performance is fairly strong, however the market reaction suggests patience with the business is running out nearly 15 years on from its IPO,” commented AJ Bell investment director Russ Mould.
“Ocado is reaching the point where more radical action is required, whether that involves a new management team being given a shot, or hiving off its retail venture with Marks & Spencer.”
On the job losses, Ocado’s Mr Steiner added: “It’s never something that’s easy or that we take lightly. It’s a very difficult day for us to have to announce that.”
The group – which employs nearly 20,000 people worldwide – has around eight R&D sites across countries worldwide, with around half of those in the UK.
The job cuts come as part of its plans to become cash flow positive in 2026, Mr Steiner said.
Annual results for the group on Tuesday showed Ocado narrowed annual losses, but remained in the red in spite of rising revenues, while its outlook for 2025 disappointed investors.
The group posted statutory group pre-tax losses of £374.5 million for the year to December 1 2024, against losses of £393.6 million the previous year.
The firm added that it remains in “constructive discussions” with Ocado Retail partner M&S over the final payment of £190.7 million due in April this year under their agreement.
It stressed it would “continue to look to use all contractual or legal means available to us in order to maximise” the amount payable.
M&S is due to pay Ocado the final instalment as part of the payment for the £750 million 50-50 tie-up between the businesses, Ocado Retail, which was launched in 2019.
But the joint venture has failed to meet performance targets in 2023, leading to negotiations between the pair, with Ocado saying in February last year that it could take legal action against M&S over the payment.
Ocado revealed it has written down the value to zero in its full year accounts, “having considered the current facts and circumstances, and the inherent uncertainty around any of the potential outcomes”.
It said: “Notwithstanding this valuation, management is committed to maximising the amount due, and believes we have a strong negotiating position in achieving some form of satisfactory settlement.”
Mr Steiner added that the group was not looking to exercise its right to sell its 50 per cent stake in the group to M&S, saying “we are absolutely retaining our stake in the venture”.
Full-year results for Ocado showed group-wide revenues rose 14.1 per cent to £3.2 billion, with its retail chain seeing growth of 13.9%.
The retail joint venture with M&S saw underlying earnings more than quadruple to £44.6 million from £10.4 million in 2023 thanks to the surge in sales, while it also notched up a 12.5 per cent rise in weekly orders and 12.1 per cent rise in customers to 1.1 million.
It added it expects retail sales by volume to rise “well ahead” of the market as it continues to add customers, forecasting revenues to rise by more than 10 per cent in 2025.
Its robotic warehouse logistics arm grew revenues by 7.6 per cent to £718 million, with underlying earnings up £1 million to £31.1. million, while its technology solutions business enjoyed growth of 18.1 per cent.
But Ocado forecast that technology solutions growth would pare back to around 10 per cent in 2025.
