By Sarah Young
LONDON, July 16 (Reuters) – Shares in British technology and online grocery group Ocado tumbled to a 13-year low on Thursday after it failed to show tangible progress in talks to secure new U.S. partners to boost its business to effectively compete with rapid delivery firms.
London-listed Ocado, which provides automated technology for distribution centres and runs its own UK online grocery business through a joint venture with Marks & Spencer, is trying to reposition itself after two key North American partners scaled back their tie-up.
Kroger in the U.S. and Sobeys in Canada opted to close robotic customer fulfillment centres they ran with Ocado, blaming weaker-than-expected demand. That has pushed Ocado’s shares down 44% in the last six months.
Ocado said it was focused on winning new business in the U.S., where it was talking to multiple retailers.
Its shares were last down 14%, hitting a 13-year low.
“Our analysis of the Group’s cash flow potential suggests management’s mid-term targets appear ambitious and we question whether Ocado will be able to compete effectively with other in-store fulfilment options,” RBC analysts said in a note.
SEARCHING FOR NEW PARTNERS
Given a wider industry shift towards fulfilling online orders from stores, some analysts have said there is less need for Ocado’s warehouse-based technology.
But CEO Tim Steiner said he was confident that Ocado’s new solution of offering smaller store-based automation services to pick orders for grocery deliveries would bring in new business.
“I think our chances of winning new partners in the next six months are good,” he told Reuters on Thursday.
The group is holding “multiple live engagements” and Steiner said some of the talks with new partners were “quite advanced”.
One-off termination payments of £351 million from Kroger and Sobeys boosted Ocado’s half-year earnings.
Stripping out those payments, Ocado’s half-year adjusted earnings fell 12% to £81 million ($109.63 million), but it stuck to a forecast to turn cash flow positive in the current six-month period, and full-year cash flow positive next year.
Following the recent stock slump, there has been speculation about the company’s leadership, but last week Ocado said that Steiner, who co-founded the company in 2000, would stay in post for at least the next 18 months.
($1 = 0.7389 pounds)
(Reporting by Sarah Young; Editing by Muvija M and Emelia Sithole-Matarise)
