Ocado soars on Korean tie-up
Rally adds £36m to Steiner’s stake
OCADO shareholders received a much-needed boost as the business struck a major deal with one of South Korea’s biggest grocers.
Shares soared 38.57pc, or 182.2p, to 654.6p after it signed a partnership with conglomerate Lotte, whose retail arm has around 1,000 stores and £9.5bn in annual sales.
The online grocer turned tech business will make six of its automated warehouses for the South Korean firm by 2028 – with the first coming online in 2025.
The share price rally added £1.5bn to the value of Ocado – and £36m to the stake of co-founder and chief executive Tim Steiner.
However, his stake of £130m is a far cry from the £573m those shares were worth when the stock peaked at close to £29 in the pandemic.
Steiner said the South Korea deal brought Ocado’s futuristic grocery delivery technology – in which robots pick and pack customers’ orders – to ‘one of the most mature’ online shopping markets in the world.
Ocado Solutions boss Luke Jensen said: ‘Lotte is a powerhouse grocery player in the market, with deep connections to its customers and the ambition to dominate the e- commerce channel in grocery.’
The deal with Lotte, which is Ocado’s 12th partner across ten countries, will see Ocado receive an upfront sum and take a share of Lotte’s sales.
It is a major boost for Ocado, which has struggled since the end of lockdowns to convince investors of the value of its hugely expensive technology. Ocado said it ‘expects this deal to create significant longterm value to the business’.
It follows a bounce for the shares last month amid talks of a merger between two of the biggest supermarkets in the US. Ocado supplies its warehousing tech to US giant Kroger, which is reportedly plotting a tie-up with Albertsons, its biggest rival.
But the shares are still down 63pc in the past 12 months as investors take flight from tech stocks and worry about Ocado’s huge expenditure and ongoing annual losses.
Ocado Retail, its joint venture with Marks and Spencer, has also been hit by the rising cost of living as customers cut back. Victoria Scholar, of Interactive Investor, said: ‘The big question is whether Ocado’s partnerships can turn it into a profitable business that returns cash to shareholders.’
Shore Capital retail analyst Clive Black, a long- time sceptic of Ocado’s value, said the partnership was ‘ not going to move the dial’.
He said it would be ‘churlish’ not to welcome the partnership, but added: ‘Despite all the technobabble, it just does not make any money.’