Ocado said on Thursday it is talking to multiple potential partners in the United States as the UK-based online grocery retailer tries to rebuild after two North American partners scaled back their tie-up and sent its shares to a 13-year low.
The company’s scramble lays bare how quickly the machinery of corporate expansion can turn on the people and firms at the bottom of the chain. Kroger in the U.S. and Sobeys in Canada opted to close robotic customer fulfillment centres they ran with Ocado, blaming weaker-than-expected demand. That retreat has already pushed Ocado’s shares down 44% in the last six months, and on Thursday they were last down 14%, hitting that 13-year low.
Who Holds the Levers
Ocado, the UK-based online grocery retailer, said it was focused on winning new business in the U.S., where it was talking to multiple retailers. The company provides automated technology for distribution centres and runs its own UK online grocery business through a joint venture with Marks & Spencer. Now it is trying to reposition itself after the North American pullback exposed the fragility of its model.
The company said the talks were not just one-off conversations. Ocado said it was holding “multiple live engagements,” and CEO Tim Steiner said some of the talks with new partners were “quite advanced.” He told Reuters on Thursday, “I think our chances of winning new partners in the next six months are good.”
That confidence comes after a rough stretch. The market has already delivered its own verdict, at least for now. Shares in the British technology and online grocery group tumbled after it failed to show tangible progress in talks to secure new U.S. partners to boost its business and effectively compete with rapid delivery firms.
Who Pays for the Retreat
The costs of these corporate recalculations land far from the boardroom. One-off termination payments of £351 million from Kroger and Sobeys boosted Ocado’s half-year earnings, but that windfall only masks the deeper strain underneath. Stripping out those payments, Ocado’s half-year adjusted earnings fell 12% to £81 million ($109.63 million).
Even with that decline, the company stuck to a forecast to turn cash flow positive in the current six-month period, and full-year cash flow positive next year. That’s the language of management trying to steady investors while the underlying business keeps wobbling.
RBC analysts were blunt about the gap between the company’s ambitions and its reality. “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,” they said.
What the Company Calls Progress
Ocado says its new solution of offering smaller store-based automation services to pick orders for grocery deliveries will bring in new business. Steiner said that shift would help the company win partners, even as the old partnerships frayed. The group is trying to sell a new version of the same promise: automation, efficiency, and expansion, this time in a smaller package.
The leadership question has also hovered over the company after the stock slump. Last week, Ocado said Steiner, who co-founded the company in 2000, would stay in post for at least the next 18 months. That announcement shut down speculation about a change at the top, at least for now.
The picture is familiar. A company sells automation as the future, partners pull back when demand weakens, and the people at the bottom of the balance sheet absorb the shock. The executives keep talking about new deals. The market keeps counting the losses. And the whole arrangement keeps depending on someone else’s labor, someone else’s demand, someone else’s risk.