Ocado's second international deal leaves short sellers nursing £50m hit
Online supermarket Ocado has announced a second major international tie-up, sending its share price up more than 15pc and leaving those betting against it nursing a £50m hit.
The FTSE 250 company will spend two years helping Sobeys, Canada’s second-largest food retailer, build a warehouse outside Toronto and will allow the chain to use its ecommerce, product-picking and logistics technology to take and deliver orders.
The jump in the firm's share price is likely to have cost those betting against it more than £50m, according to Daily Telegraph calculations.That follows a £75m hit when Ocado announced its last deal, with France's Groupe Casino, in November.
The retailer is among the most shorted stocks in the UK. Around 13.5pc of its shares are on loan to short sellers, who borrow shares and sell them in anticipation of the stock falling in price, only to buy them back cheaply at a profit. This gamble can backfire when a company's performance surprises investors.
Ocado’s chief financial officer Duncan Tatton-Brown dismissed the actions of the short sellers, saying: “It’s not something we spend a lot of time focusing on, we’re focussed on doing the right things for our own business.”
Outsiders would get a better sense of the business’s value when it starts reporting its retail and business-to-business sales separately this year, he added.
Ocado expects the Sobeys deal to have minimal impact on its earnings this year with an extra £15m in capital expenditure needed, but said profitability would grow in 2019 and beyond. It did not say how much it would make from the tie-up, but Mr Tatton-Brown insisted it would "generate significant long-term value to the business”.
The deal is exclusive to Sobeys in Canada, and Ocado said there was scope to open more warehouses in the country's “dense urban areas” in the future. It follows the company's long-awaited tie-up with French grocer Groupe Casino in November, news of which sent its shares up more than 20pc.
Sobeys chief executive Michael Medline said: “This unique and innovative Sobeys and Ocado experience will offer consumers the biggest selection, freshest products and most reliable delivery available anywhere on the planet.”
Ocado also runs the online operation of UK supermarket Morrisons and has agreed to license its software to an unnamed European grocery chain.
Sobeys, whose headquarters are in Nova Scotia, has 1,500 stores and 125,000 workers.
Ocado's shares were up 16.5.pc to 482p in afternoon trade.
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