Ocado shares fell up to 17.6 percent on Thursday, after the UK-based grocery and technology firm announced that a deal for a robotic warehouse at Canadian supermarket chain Sobeys had been halted. The company also said their partnership was no longer exclusive.
Ocado Group – which owns a half stake in the UK’s online only supermarket Ocado Retail – has bet its future on selling software and robots around the globe to traditional supermarket chains to help them boost ecommerce.
In recent months, it had to deal with the decision of another key partner – Kroger in US – to close three sites powered Ocado. This has cast doubt on its future growth prospects.
William Woods of Bernstein’s retail analyst said that the announcement made on Thursday was “bad as Canada had been performing well, and it adds another partner [alongside with Kroger] who is pulling away”.
Ocado was demoted this month from the FTSE 100 Index. On Thursday, it said that Kroger, Sobeys and Sobeys had “both announced strong digital growth in their latest quarter results”.
The stock fell 88 percent since it reached a record-high during the pandemic boom of online shopping, after consumers returned to physical shops faster and in greater numbers.
Ocado, Canada’s largest food retailer, signed a contract with Sobeys in 2018 to launch an online grocery service using Ocado technology.
On Thursday, Ocado announced that “the Vancouver [depot] would be regularly reviewed” and both businesses agreed to terminate exclusivity. This will allow them to collaborate with their rivals on similar project.
In the afternoon, shares recovered a portion of their losses.
The group stated that Ocado did not change its guidance for the current financial year, “together with our goal to be cash-flow positive in the medium term”. Ocado is viewed by some analysts as the future of online retail, while others see it as a money-sucking venture with unreliable profits.
Investors at the annual meeting revolted against a new compensation scheme in April. The scheme included a bonus award up to £15mn (£15mn) for Tim Steiner as chief executive, based on exceeding performance targets.
Steiner co-founded his company in 2000 with two Goldman Sachs executives, during the dotcom boom. In 2019, he was paid £59mn despite Ocado’s £215mn losses, making it one of the highest annual payouts ever for a FTSE 100 CEO.
Ocado was one of the London-listed stocks that had the highest shorting, with 6,1% of its shares owned by investors who bet on the price of the stock falling further. This is according to the Financial Conduct Authority’s data released on Wednesday.
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