Ocado shares stumble on overseas deal delay
Shares in Ocado have stumbled as investors balked at its repeated failure to seal a deal with an international partner and an admission that the amount customers are buying is shrinking.
The online grocer has already missed its own deadline of signing a long-awaited agreement to licence its technology to an overseas retailer by the end of last year.
Analysts believe that such a deal with another European or US business would boost Ocado's stock market value and give credence to its business model.
Duncan Tatton Brown, Ocado's finance chief, said that his confidence in signing multiple deals in the medium term "remained undiminished" and said that its new, high-tech distribution centre at Andover could help talks with potential international partners.
"This isn't a sprint, this is a marathon, and we're quite confident that the new facility opening is helpful," Mr Tatton Brown said.
Ocado's attractiveness to overseas partners has been questioned by City analysts after Morrisons, which has a contract with the online grocer, signed a separate wholesale deal with Amazon that paved the online giant's foray into grocery deliveries in the UK.
Last month Morrisons also extended this relationship, offering London-based Amazon Prime customers food deliveries within an hour of ordering. Ocado's shares dived on fears that the offer could lure shoppers away from the online grocer.
"Amazon’s new partnership with Morrisons will undermine Ocado’s strength to negotiate new partnerships in 2017 and beyond", said Michael Coombs, analyst at Verdict Retail.
Ocado has repeatedly argued that it is not concerned by Amazon's entrance into the market and that the US giant's arrival will help to grow the UK online grocery market, which currently accounts for just 6pc of total food sales.
However, the Big Four are also heavily investing in their own delivery capabilities with Sainsbury's and Tesco also launching same-day services in the capital.
Ocado said that sales, including its Morrison.com business, rose by 14.5pc to £436.8m during the 16 weeks to November 27.
However, the average order size of its customer - known as a basket - shrunk to £105.61 from £108.71. Ocado blamed the drop on falling food prices and shoppers using its Smart Pass scheme, which offers customers a 10pc discount on deliveries. Meanwhile, the average orders per week grew by 17.6pc during the period to 241,000.
Mr Coombs of Verdict said that the sales figures represented the endemic price deflation in the food sector and customers' shift away from the big weekly shop to more frequent, smaller shops.
However, the introduction of Ocado's Smart Pass would "add another layer of complexity to the distribution network and weigh heavily on profit margins", the analyst warned.
Ocado shares fell by 14.3p, or 5.15pc, to 263.4p.
"We are very pleased with the financial performance achieved this year," said Ocado chief executive Tim Steiner. "The strong growth in sales and order volumes reflects the attractiveness of our retail offer to customers."
No comments:
Post a Comment