LONDON — Online supermarket Ocado’s share price has opened over 7% higher on Monday, after the company announced its first international deal.
Ocado first announced plans to sign an international deal back in 2015, promising progress by the end of the year. After over a year of delays, the online grocer on Monday finally announced a tie-up.
An unnamed retailer, that “wishes to remain anonymous until it launches its online business in order to retain competitive advantage,” has signed up to use Ocado’s Smart Platform, logistics software that helps grocers deliver an online service.
The retailer will not use Ocado’s automated picking technology to put baskets together, ready for delivery, but the agreement gives the customer the option to request this in future. The retailer will pay an upfront fee as well as on-going licensing fees based on volume of products sold.
The announcement has sent Ocado’s stock popping more than 7%. Here’s how it looks after around 10 minutes of trade in London:
CEO Tim Steiner calls the deal “an exciting step in the evolution of our business and in the delivery of our strategy.” Ocado’s long-term goal is to be a software and technology provider to the online grocery market, not an online grocer itself.
However, Neil Wilson, a senior market analyst at ETX Capital, says: “The devil is in the detail and while welcome it’s unclear what actual value this deal in itself will bring to Ocado. Financials details about the tie-up are non-existent at present. The European retailer will not be using Ocado’s automated warehouse technology.
“We don’t even know who the company is — Ocado simply dubs it a ‘regional’ retailer (not a national one). This is progress after a lot of promises, but it’s not exactly like doing a deal with Wal-Mart – yet.”
FTSE 100 remains in record territory
Elsewhere in stock markets on Monday morning, the FTSE 100 remains close to record highs. The index is up 0.10%, or 7.63 points, to 7,555.26 after around 25 minutes of trade in London.
Henry Croft, a research analyst at Accendo Markets, says: “Helping sentiment is a rally for Crude Oil, coming as four Gulf States, including de facto OPEC leader Saudi Arabia, cut diplomatic ties with OPEC member Qatar over concerns about the country’s terrorist links. This is helping to offset a mixed lead overnight from Asian markets.”
US West Texas Intermediate oil is up 0.88% to $US48.16 at 8.30 a.m. BST (3.30 a.m. ET). Brent crude is up 1% to $US50.45 at the same time.