Ocado Group's shares tumbled to their lowest level in 13 years on Thursday, as investor patience wore thin over the company's slow progress in securing new retail partners in the United States. The stock fell 14% on the day, extending a six-month decline of 44% that reflects mounting uncertainty about the company's growth trajectory.
North American Setbacks Weigh on Sentiment
The British technology and online grocery group has faced significant headwinds after two major North American partners scaled back their relationships. US retailer Kroger and Canadian supermarket chain Sobeys both decided to close robotic customer fulfilment centres operated with Ocado, citing weaker-than-expected demand. These closures have heightened concerns about the company's ability to replace lost business and expand its technology platform.
Ocado develops automated technology for distribution centres and also operates its UK online grocery business through a joint venture with Marks & Spencer. The company is now repositioning its business after these setbacks, focusing on winning new commercial partnerships in the US.
CEO Expresses Confidence in Near-Term Deals
Despite the recent disappointments, Chief Executive Tim Steiner remains optimistic. In an interview with Reuters on Thursday, Steiner stated, "I think our chances of winning new partners in the next six months are good." He highlighted the company's latest offering—smaller store-based automation services that help retailers pick online grocery orders—as a key differentiator. This solution is designed to complement retailers that fulfil online orders directly from stores, rather than relying solely on large automated warehouses.
The company confirmed last week that Steiner, who co-founded Ocado in 2000, will remain in his role for at least the next 18 months, providing continuity as it pursues new partnerships.
Analysts Question Long-Term Competitiveness
While management projects confidence, some analysts remain skeptical. RBC analysts noted in a research report that Ocado's financial targets may be difficult to achieve. "Our analysis of the Group's cash flow potential suggests management's mid-term targets appear ambitious and we question whether Ocado will be able to compete effectively with other in-store fulfilment options," the analysts said. Their comments reflect broader concerns that warehouse-based automation technology may face increasing competition from lower-cost store fulfilment models that many retailers are adopting.
Termination Payments Boost Reported Earnings
Ocado's half-year earnings received a significant boost from one-off termination payments totalling £351 million following the end of its arrangements with Kroger and Sobeys. Excluding those payments, the company's adjusted earnings for the first half declined 12% to £81 million ($109.63 million). Despite the weaker underlying performance, Ocado maintained its guidance that it expects to become cash flow positive during the current six-month period and reiterated its forecast of achieving positive cash flow for the full year next year.
For context, other technology-focused companies have seen contrasting fortunes. For instance, Seagate shares surged after a Wells Fargo upgrade on AI-driven HDD demand, while AstraZeneca shares tumbled 9.5% after a key trial failure. Meanwhile, MasTec shares surged 6% on a $1.65B deal to expand AI data center reach.
Investors will be watching closely for any announcements regarding new US retail partnerships, which could provide a much-needed catalyst for the stock.
This article is for informational purposes only and does not constitute financial advice.
