Ocado shares surge on latest US deal rumours

Investors losing patience as company misses its own targets for international expansion


Ocado shares surged by more than nine per cent on Monday, as the latest rumours swirled that it could finally be set to strike a deal in the potentially lucrative US market.

Reports indicate the online grocery retailer has "brought on consultants at Mace to advise on a potential US debut", says the Daily Telegraph. Speculation is focused on Florida-based Publix, a regional grocery giant with $33bn (£24bn) in annual sales.

The chain, which has 1,100 stores across Florida, Georgia, North Carolina, South Carolina, Virginia and Alabama, has previously sourced goods from Ocado's upstart US rival, Shipt, "but the service has struggled to keep up with demand".

Subscribe to The Week

Escape your echo chamber. Get the facts behind the news, plus analysis from multiple perspectives.


Sign up for The Week's Free Newsletters

From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.

From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.

Sign up

Suggestions Publix will sign with Ocado propelled the UK firm throughout the opening session of the week, ending up 9.3 per cent at 326.7p. Shares were trading flat at lunchtime today and are still down around 31 per cent over the past year.

Investors have been keenly awaiting a deal to mark the start of the online supermarket's international expansion, which it initially signalled last February and promised would begin by the end of 2015. The company "wants to be the Amazon Web Services of the bread aisle, a provider of software and delivery services to big supermarkets around the world", says Bloomberg.

By all accounts, shareholders have "grown impatient" at the missed target, together with February's news that the company's pole position in the UK market was being challenged after Morrisons, which previously used Ocado exclusively for its online activities, had signed a distribution agreement with Amazon.

Bloomberg also suggests the company is under pressure to make its break in the US, where e-commerce in the grocery sector is picking up fast. A number of rivals, such as Shipt, Postmates, and Instacart, have emerged and the likes of market leader Walmart have decided to go it alone.

Ocado has managed to turn a decent profit for the past two years and has a good margin compared with its rivals. In the UK, it has taken a market share of close to 20 per cent in the nascent online grocery market and struck some good deals, proving "it is doing something right", says Bloomberg.

But if it wants to realise its ambitions, Ocado needs "to convince others of its promise" and start delivering on the pledges it has made to its investors.

To continue reading this article...
Continue reading this article and get limited website access each month.
Get unlimited website access, exclusive newsletters plus much more.
Cancel or pause at any time.
Already a subscriber to The Week?
Not sure which email you used for your subscription? Contact us