Ocado Rises as Investors Buy Into High Hopes for 'Microsoft of Retail' --Update
05 Février 2019 - 3:29PM
Dow Jones News
(Adds CEO, analysts' comments, detail throughout, share price
movement)
--Ocado shares rose Tuesday after its annual results, despite a
sharply increased loss due to investment spending
--Ocado said its fiscal 2019 earnings will also be held back by
increased spending on construction of distribution centers for a
number of international supermarket chains
--Shares in Ocado have more than doubled in the last year as the
company pivoted toward marketing its distribution technology and
signed a string of deals, with grocers rushing to counter the
threat from Amazon
By Adam Clark
A higher annual loss at Ocado Group PLC (OCDO.LN) didn't faze
investors, as the online supermarket laid out plans to increase
spending on its automated-distribution centers and become a global
player in grocery distribution.
Chief Executive Tim Steiner on Tuesday hailed 2018 as a
transformative year for the British company, which signed a string
of international partnerships for its technology platform as
supermarkets seek to respond to the threat of Amazon.com Inc.
(AMZN) entering the sector.
Deals with U.S. grocer Kroger Co. (KR), France's Casino
Guichard-Perrachon SA (CO.FR) and Canada's Sobeys Inc. have helped
Ocado's share price more than double over the last 12 months and
sent it surging into the FTSE 100. With Ocado formerly one of the
most heavily-shorted stocks in the London markets, the deals forced
a number of hedge funds to buy back their borrowed shares and cut
their losses.
The share price rise means shareholders are currently willing to
overlook the costs of investment to meet Ocado's side of the new
deals. The company booked a pretax loss of 44.4 million pounds
($58.0 million) for its year to Dec. 2 compared with a GBP9.8
million loss the prior year. Earnings before interest, tax,
depreciation and amortization fell 21% to GBP59.5 million.
Shares traded up over 4% by afternoon in London, although the
rise was halted when the company said in a later statement that a
fire at one of its warehouses led to a suspension of operations at
the site.
Ocado's sharp fall in annual earnings was partly due to new
accounting standards preventing it from recognizing revenue for
upfront cash payments from partners, which rose 36% to GBP200.1
million. Ocado's revenue rose 12% to GBP1.60 billion, with
double-digit percentage growth in both Ocado's retail and solutions
businesses.
The revenue-recognition delay will drag on Ocado's results in
fiscal 2019, when it expects a hit of between GBP15 million and
GBP20 million due to the cost of building distribution centers for
its partners.
This year Ocado intends to raise its capital spending to GBP350
million from GBP214 million. The company is set to open 23 new
distribution centers for existing partners over the coming years,
although it has not commented on speculation of a tie-up with U.K.
retailer Marks & Spencer Group PLC (MKS.LN).
Analysts at stockbroker Peel Hunt said the results show that
Ocado is positioning for the future; they expect the company to
branch away from food retail to become the "Microsoft of Retail".
Ocado told analysts it intends to trial its one-hour delivery
service, branded Zoom, next month in London.
Mr. Steiner said the company is now a world-leading provider of
e-commerce grocery solutions and a creative technology company.
Write to Adam Clark at adam.clark@dowjones.com;
@AdamDowJones
(END) Dow Jones Newswires
February 05, 2019 09:14 ET (14:14 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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