Coronavirus: Ocado closes website amid 'unprecedented strain'

Oscar Williams-Grut
Senior City Correspondent, Yahoo Finance UK
A generic stock photo of an Ocado home delivery van in south west London. (PA)

Ocado (OCDO.L) has shut down its app after a surge of orders led to “unprecedented strain” on the business.

Melanie Smith, Ocado Retail's chief executive officer, said in a trading update on Thursday that orders had “picked up significantly and growth in the second quarter is so far double that of the first quarter”.

Smith said “growing public concern over the Coronavirus” had led to more and bigger orders. Delivery slots are booked out days in advance and there is huge strain on the business.

Ocado had in recent days already stopped signing up new customers and introduced a digital queueing system that has angered some shoppers. Demand became so great that on Wednesday Ocado shut down its website altogether.

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Ocado said the shutdown would be temporary “while we scale ability to serve the unprecedented use of our customer interfaces.”

Smith said Ocado had also introduced new measures to protect Ocado’s employees, such as only delivering groceries to people’s doorsteps and not collecting plastic bags for recycling.

“I'd also like to take this chance to thank our amazing drivers and warehouse staff who are working tirelessly to deliver groceries to as many people as possible in these uncertain times,” Smith said.

“Their dedication and hard work is truly amazing.”

The update came as Ocado reported on first quarter trading. Sales rose by 10.3% to £441.2m in the 13 weeks to 1 March. Ocado said this was before the surge in orders driven by Covid-19.

Ocado left its forecasts for future growth unchanged despite the surge in orders.

“We expect the impact of forward buying... to unwind at some point,” Smith said.

Sophie Lund-Yates, an equity analyst at Hargreaves Lansdown, said: “In reality these extra sales have simply been borrowed from the coming months and should even out.”

Shares in Ocado were down 5%, with analysts citing disappointment that sales growth forecasts weren’t upgraded.