Ocado stays silent on M&S

UK online supermarket Ocado said investment in its partnership deals would hit short-term profits, while remaining tight-lipped about media reports of tie-up talks with Marks & Spencer.

Ocado stays silent on M&S

UK online supermarket Ocado said investment in its partnership deals would hit short-term profits, while remaining tight-lipped about media reports of tie-up talks with Marks & Spencer.

The company also reported a 21% fall in full-year earnings, hit in part by new accounting rules.

Though Ocado has only a 1% share of Britain’s grocery market, its £6.9bn (€7.9bn) stock market valuation has been driven by the technology side of its business — providing third parties with the infrastructure and software to develop their own online grocery businesses.

The firm’s shares have nearly doubled over the last year on the back of four major overseas partnership deals — the biggest of which was signed last May with US supermarket chain Kroger.

Last week, media reports said Ocado was in talks over a possible tie-up with M&S.

M&S currently sells wine, flowers, and clothes online, but does not offer a full food delivery service.

“It is our business to talk to retailers and we never comment on who we’re talking to,” Ocado chief executive Tim Steiner told reporters.

M&S has also declined to comment. The reports have centred on Ocado replacing its current main food supplier, Waitrose, with M&S.

Ocado’s deal with Waitrose, owned by the John Lewis Partnership, ends in September 2020, though it could be extended.

“We have a good relationship with Waitrose,” said Mr Steiner.

Ocado made earnings before interest, tax, depreciation and, amortisation (Ebitda) of £59.5m in the year to December 2, down from £75m in 2016-20717. Group revenue rose 12.3% to £1.6bn.

Ocado forecast retail revenue growth of 10% to 15% as it increases capacity and grows market share. It also forecast growth in retail core earnings.

But it said that while the targeting of further partnership deals would generate additional cash fees for the technology solutions division there would be a short-term hit to profits.

The adoption of a new accounting standard will mean technology solutions revenue will only be recognised once a customer’s first automated warehouse is opened.

However, build costs will still have to be recognised.

Meanwhile, Britain’s big four supermarkets continue to lose share to German discounters Aldi and Lidl in the 12 weeks to January 27, market research firm Kantar Worldpanel said.

Aldi saw sales rise by 9.1% and Lidl by 7.3%, Kantar said.

- Reuters

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