Shares in Ocado slipped by two per cent on Tuesday 30 December as the online grocery specialist announced a renewed drive to sell its advanced robotic warehouse systems worldwide, following a turbulent period for its international ambitions.
Global Ambitions Unlocked
The company's strategy shift comes as most of its exclusivity agreements with international partners, including the US retail giant Kroger, have now expired. This frees Ocado to pitch its evolved, AI-driven fulfilment technology to new retail clients in major global markets. The move is aimed at generating significant recurring revenue streams outside its established partnerships.
Chief executive Tim Steiner stated: “As we continue to support all of our partners to improve and grow their online businesses, we will also now bring the full range of Ocado’s AI-powered and robotic solutions back to multiple markets.” He added that in the five years since its first international customer fulfilment centres launched, the company had “substantially evolved” its market-leading solutions.
US Cautionary Tale and Domestic Growth
The US experience serves as a warning, however. Kroger cancelled three automated warehouses and shelved plans for a fourth, though Ocado is set to receive £259m in compensation for the setback. Despite this, the firm's recent half-year results to 1 June showed a dramatic turnaround, with a pre-tax profit of £611.8m compared to a £153.3m loss the previous year, boosted by a revaluation of its stake in Ocado Retail.
Domestically, the business continues to expand. Ocado Retail, its joint venture with Marks & Spencer, now delivers to around 82 per cent of the UK population and reported a 15.8 per cent sales increase in the 12 weeks to November. To capture rising demand in the north, the company is targeting a new fulfilment centre near Manchester to boost next-day delivery capacity.
Analyst Warnings and Market Reaction
While outlining its global tech pivot, analysts have cautioned that exporting the capital-intensive warehouse model remains challenging. They point to Ocado's “double-digit leverage, low interest coverage and sustained negative free cash flow.”
Investors were weighing this potential against the lessons from the Kroger setback on Tuesday, with shares trading near 220p in early deals. The company's future now hinges on its ability to successfully sell its sophisticated robotic picking and AI fulfilment systems to a broader array of international retailers.
