If I’d invested £1,000 in Ocado shares 1 year ago, here’s how much I’d have now!

It was a miserable year for investors Ocado (LSE:OCDO) shares. In fact, online grocery businesses have the worst awards FTSE 100 Savings on a 12-month basis.

So, how bad has it produced and why? And, is there any chance that the stock price will recover?

Here I am.

Come home rotten

Ocado’s share price has been on a consistent downward trend since peaking in early 2021. Over the past year, its shares have fallen 62% from £10.97 apiece to £4.19 today.

If I had £1,000 to invest in a company a year ago, I could have bought 91 shares, leaving me with £1.73 in spare change. Today, my shareholding will drop to £381.29. That backfired.

Not only Ocado shares significantly underperformed the FTSE 100 index (if I invested in the tracker fund over the past 12 months, I had a positive return), but the company does not pay dividends.

The bottom line is that I have no passive income to cushion the blow, and my investment will be worth over £600 less than it was a year ago.

Reasons for reduction

Ocado has a recent history of producing poor financial results. The company’s pre-tax loss of £501m for 2022 is disappointing. A huge £324m increase in the group’s 2021 losses.

What’s more EBITDA went negative to the tune of £74m – the first time it has done so in at least five years.

The slump was largely driven by weak trading conditions for the group’s retail arm. The cost of living crisis is certainly a factor. Likewise, online shopping volumes are down after an artificial surge during the pandemic.

Net debt is now around £577 million and the group is reducing its capital expenditure. In the context of these worrying figures, it may come as no surprise that Ocado’s share price has fallen as investors grow impatient.

A brighter future?

But, is it all bad news for the company?

Expansion is one silver lining. The group is doubling the number of operations, with 12 new global sites, including nine additional customer fulfillment centres. It has the Asia-Pacific region in the crosshairs for 2023, with new centers planned in Japan and Australia.

Indeed, Ocado’s International Solutions division delivered 122% revenue growth last year to £148m, offsetting some heavy retail losses.

There’s also no denying the quality of Ocado’s offer. An end-to-end online wholesale fulfillment solution is highly scalable and should have great potential, if executed successfully.

Should I buy Ocado shares?

However, I worry that the business is failing to realize its potential. The rate of new sign-ups is slow and I think that companies are wasting a golden opportunity during the pandemic – a time when their business model doesn’t look better.

In addition, the competition in the sector is increasing. The presence of German discount brands like Lidl and Aldi means it could be a long and difficult road to profitability for Ocado.

Ocado shares have growth potential, but I fear I may have to wait too long to see a good return on my investment. Recent financial results have caused significant concern for me, so I prefer to invest elsewhere now.