Earnings dip but global deals boost Ocado
ONLINE GROCER Ocado is set to brush off a dip in half-year earnings on Tuesday as it continues to bask in the success of recent high-profile international deals.
The group was catapulted into the FTSE 100 for the first time last month after seeing its share price rocket more than 260 per cent over the past year following a string of deals – most recently signing up US giant Kroger in May.
It has struck similar agreements in Europe and beyond, and is developing customer fulfilment centres with retailers in France, Canada and Sweden.
Tuesday’s figures are set to show the impact of a snow-hit first quarter.
Numis Securities analyst Andrew Wade said he is expecting underlying half-year earnings of £43.5m, down from £45m a year earlier.
But he said the focus will remain on its “huge” recent deal with Kroger and future opportunities.
Mr Wade added: “The shares have had an outstanding run –up 261 per cent over 12 months – reflecting recognition of the value in Ocado’s solutions division, the earnings runway afforded by the recently signed deals, and the validation of Ocado’s platform operation.”
Shares in Ocado, which works with Bradford-based supermarket chain Morrisons in the UK, were held back in previous years when it was slow to sign its first international deal.
But the flurry of recent signings – with the likes of Canadian retailer Sobeys and French supermarket giant Groupe Casino – have reaffirmed investor confidence in the group’s strategy.
Ocado provides the technology to its partners to allow them to take their services online.
The technology, known as the Ocado Smart Platform, is an automated system for packing orders in warehouses.
It is operated by robots, which whizz around a grid to pick up products and deliver them to employees, who pack items into the bag for the customer.
Ocado’s technology is unique because it is the only system that can provide such an automated service for food packing, whereas many retailers still use a ‘store pick’ model for delivering online groceries, which involves sending workers round supermarkets to physically pick products from shelves.
In May, Ocado announced its fourth international deal, with Swedish supermarket group ICA.
Under the terms of the agreement, Ocado will launch ‘endto-end’ solutions for ICA’s online grocery services, including a website and the construction of an automated warehouse designed for ecommerce.
The online specialist will invest in installing internal infrastructure at the warehouse, as well as “robots”.
ICA has around 1,300 stores across Sweden and enjoys a market share of 36 per cent, with sales of 106.5 billion Swedish krona (£8.9bn) in 2017.
ICA and Ocado will develop their first ‘customer fulfilment centre’ in the Greater Stockholm area, the two companies said in May.