Ocado’s share price up 4% after strategic partnership with Coles supermarkets
The food delivery service provider saw its share price climb higher on Tuesday after announcing a new strategic partnership with Australian-based supermarket Coles.
Ocado saw its share price climb 4% after it confirmed a strategic partnership with Australian supermarket company Coles.
This latest deal comes just weeks after Ocado opted to sell 50% of its UK retail business to British supermarket Marks & Spencer (M&S), with its recent string of tie-ups offering an insight into the new direction the company is heading.
Technology at the heart of Ocado's future
In a recent report, Hargreaves Lansdowne posed the question: ‘what exactly does Ocado do if it’s not scurrying around delivering upmarket groceries?’
The answer: stop worrying about selling upmarket groceries and, instead, focus on providing a sophisticated technology platform to help retailers increase their online sales.
‘[Ocado’s] cutting edge systems fulfil tens of thousands of orders every day, largely without human intervention,’ George Salmon, Equity analyst at Hargreaves Lansdowne said.
‘And those whirring systems are a product themselves, with other retailers paying license fees to make use of them.’
Ocado’s latest deal with Coles is one of several strategic partnerships that the company has made to help limit its exposure to food retail and instead serving its online sales platform to retailers for a fee, which over the long run could see it margins outperform the supermarkets it works with.
‘Tesco manages an operating margin of around 3% on its £60bn-ish of sales,’ Salmon added. ‘Ocado might not be able to match it on the top-line, but its shift to lucrative technology business means margins should outshine Tesco's in time.’
More deals ahead if Ocado is to secure its future
With Ocado signing several major partnerships with the likes of Kroger – the second largest food retailer in the US – as well as deals with M&S and Coles, the company’s transformation from a UK-based food retailer to international technology platform provider is well under way.
But there is still a lot of work to be done, with the company more than capable of funding the investments it needs to complete its transformation after securing more than £750 million in cash from the sale of its UK retail business to M&S.
IGA, may distribute information/research produced by its respective foreign affiliates within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.
The information/research herein is prepared by IG Asia Pte Ltd (IGA) and its foreign affiliated companies (collectively known as the IG Group) and is intended for general circulation only. It does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. You should take into account your specific investment objectives, financial situation, and particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit.
No representation or warranty is given as to the accuracy or completeness of this information. Consequently, any person acting on it does so entirely at their own risk. Please see important Research Disclaimer.
Please also note that the information does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. Any views and opinions expressed may be changed without an update.
European Central Bank meeting
Learn about how the ECB meeting affects interest rates and price stability ahead of the next announcement.
- How might the next meeting affect the markets?
- What are the key rate decisions to watch?
- Why is the Governing Council announcement important for traders?
Live prices on most popular markets
- Forex
- Shares
- Indices
See more forex live prices
See more shares live prices
Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.
See more indices live prices
Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 20 mins.