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Ocado raises profit forecast as Covid fuels online grocery demand | Business

Ocado has sharply raised its forecast for full-year profits as the Covid-19 pandemic drives a surge in online food shopping.

The company said underlying profits at its Ocado Retail division, which began selling Marks & Spencer food in September, were now expected to be more than £60m, compared with expectations of £40m less than two months ago.

Shares in Ocado rose 7% on Monday, making it the top riser on the FTSE 100, after the high-tech delivery firm upgraded its profits guidance and said it continued to operate at full capacity on the back of high demand for grocery deliveries before a second lockdown in England.

Duncan Tatton-Brown, Ocado’s finance director, said the uplift in profits had come as the UK continued to suffer under Covid-19. “Most of the country had hoped the effects of the pandemic would have started to mitigate by now. Unfortunately that has not proven to been the case,” he said.

Tim Steiner, the chief executive of Ocado, said the group was not seeing customers stockpiling but was “continuing to trade at peak volumes every day” as shoppers switched away from physical stores during the pandemic.

Shares were also boosted by the news that Ocado plans to expand into offering delivery services for clothing and general merchandise retailers after buying two US-based robot developers.

Ocado, which has sold its technology to supermarkets around the world to help them deliver groceries, said it expected the acquisitions to help it expand faster and operate its own and other retailers’ delivery systems more efficiently.

Ocado has paid $262m for the San Francisco and Toronto-based Kindred Systems, which has developed artificial intelligence-driven robotic picking equipment for companies such as Gap and the denim brand American Eagle, and $25m for the Las Vegas-based Haddington Dynamics, which makes robotic arms that can replace humans in picking and packing goods for home delivery.

Ocado has five of its own robotic picking arms in operation in the UK but this complex last step of the process – which involves taking varied and often fragile items from crates and packing them into bags for shoppers – is currently mostly done by humans.

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Steiner said: “We believe our combination of skills and experience will transform the way the retail industry as a whole processes orders online.

“We expect that over the next two to three years we can remove the majority of the requirement for people to pick in those warehouses.”

In the UK, Steiner said Ocado’s two oldest grocery delivery facilities in Hatfield and Dordon, which employ more than 4,000 pickers, were not suitable for installing the picking robots but it expected them to start replacing workers at its newer Erith distribution centre and other new UK facilities within two or three years.

However, he said the total number of people employed by Ocado in the UK would continue to rise as it would be creating “more high-quality engineering jobs” rather than “manual operations”. He said: “We don’t expect to see any redundancies as a result of this technology.”

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