Ocado share price down 5% as online groceries delivery service shoppers buy less

Published On: May 26, 2022Categories: Stocks & Shares2.1 min read

The Ocado share price has lost 5% today and was down as much as 8% at one point as the online groceries and warehouse automation company’s valuation continues its recent descent. Ocado’s market capitalisation has dropped by 53% this year and 64% over the past twelve months. It is down almost 75% on its most recent high set in February 2021.

The latest drop in the London-listed technology company comes after it today reported a drop in the value of its average shopping basket as customers feel the squeeze of high inflation. Customers of Ocado Retail, the online groceries business joint venture it operates in partnership with Marks & Spencer, are typically less price sensitive than those of the big supermarket chains. Despite that, the company said today they have recently been ordering “one or two” fewer items, bringing down the value of the average basket by about 9%.

As a result of the evidence of belt-tightening, Ocado lowered its full-year forward guidance in a trading update this update. While previously expecting full year growth of 10%, a forecast made just two months ago, it now sees “low single digits” as more realistic.

M&S, Ocado’s partner in its retail-facing business, also today warned that it expects profits to fall again this year because of its withdrawal from Russia, lower income from its Ocado Retail venture and a tougher consumer environment. The upmarket food, clothing and homeware retailer had just announced a return to profit under departing chief executive Steve Rowe.

Rowe signed off by telling investors that while the Ocado Retail joint venture is experiencing a “short-term reversal”, buying a 50% stake in the business was “clearly the right thing” for M&S to do. M&S’s company statement read:

“The fundamentals of the business are strong and Ocado Retail is confident that sales and [underlying profit] contribution will follow an increasingly positive trajectory in the medium to long term.”

The other side of Ocado’s business, Ocado Technology, licenses and builds proprietary warehouse automation robotics for international groceries chains including Kroger in the USA, Sobeys in Canada and France’s Casino. Two days ago it announced the €10.2 million (£8.69 million) proposed acquisition of Mrymex, a Greek technology company specialised in materials handling robotics. The terms of the transaction have been agreed and the deal expected to complete on June 6th.

Ocado had previously acquired a minority stake in the company in 2020 and the start-up has been working on a proprietary solution for Ocado that automates the loading of totes containing customer orders onto frames ready for dispatch. The ‘Automated Frameload’ solution (AFL) will be going live in Ocado’s customer fulfilment centres (CFCs) later this year.

Over 30 automation hardware and software specialists from Myrmex will join Ocado Technology’s current team of around 2500 software and hardware engineers and other tech specialists.

About the Author: Jonathan Adams

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