An Ocado delivery vehicle in London on January 21, 2022.
Mike Kemp | Pictured | Getty Images
his Ocado raised its annual guidance on Tuesday, citing improved profitability from its warehouse technology business, reassuring investors and sending shares up 18%.
The group operates an online grocery store in the UK through a joint venture with Marks & Spencer and also sells its advanced warehousing technology to retailers around the world.
The company’s shares have fallen 55% this year as the market worries about a slowdown in the rollout of robotics sites and modules to the company’s retail partners.
But shares jumped 18% to 402 pence in early trade on Tuesday as the company upgraded its profit margin and cash flow guidance, and CEO Tim Steiner told Reuters that investors had no reason to worry.
“I’m not worried about investors losing confidence because they shouldn’t lose confidence. We have a clear plan and we’re executing on that clear plan,” Steiner said.
Citi analysts said the stock price reaction was understandable given the technology upgrades and cash expectations, along with the weakness in recent days.
Last month, Ocado said its supermarket partner Sobeys in Canada had paused the opening of its fourth robot warehouse, or fulfillment center (CFC), as Ocado calls it.
Ocado has seen it too. Kroger in the US has slowed the rollout of sites. Some analysts also believe Ocado will need to raise significant additional capital.
Ocado said it now expects its main technology solutions division to achieve a “mid-single digit” EBITDA margin for the full year of 2023-24, compared with a previous target of more than 10%.
The company also forecast underlying cash flow to improve by £150m, up from its previous expectation of £100m, and said liquidity remained strong at £1.05bn.
Underlying earnings, or adjusted EBITDA, Ocado’s preferred measure, for the first half was £71.2m, up from £16.6m. Revenue rose 12.6% to £1.5bn.
