Ocado shares hit 13-year low as US partner talks stall

Ocado shares fell 14% on Thursday to their lowest level in 13 years after the company reported limited progress in securing new retail partners in the United States.

The London-listed firm develops automated technology for distribution centres and runs its UK online grocery business through a joint venture with Marks & Spencer. The stock decline followed setbacks with two North American partners.

US retailer Kroger and Canadian supermarket group Sobeys closed the robotic customer fulfilment centres they operated with Ocado, citing weaker-than-expected demand. Those closures removed expected revenue and raised questions about the scale of future partner-driven sales.

The company is in talks with multiple US retailers to establish new commercial agreements. It is promoting a smaller, store-based automation system designed to help retailers pick online grocery orders from shops rather than relying only on large automated warehouses. Tim Steiner expressed confidence in the sales pipeline, adding, “I think our chances of winning new partners in the next six months are good.”

Financial results reflected the disruption. Ocado’s half-year adjusted earnings included one-off termination payments totalling £351 million after the end of the Kroger and Sobeys arrangements. Excluding those payments, adjusted earnings fell 12% to £81 million.

The company reiterated guidance that it expects to become cash-flow positive during the current six-month period and kept its forecast of positive cash flow for the full year next year.

RBC analysts wrote that their analysis of Ocado’s cash-flow potential makes management’s mid-term targets appear ambitious and questioned whether the company can compete effectively with in-store fulfilment options. The analysts noted trends toward lower-cost store-based fulfilment and faster delivery rivals that could reduce demand for large warehouse automation.

Ocado’s share price has dropped about 44% over the past six months. The board confirmed that Steiner, a co-founder, will remain chief executive for at least the next 18 months while the company seeks new partners and implements its revised technology offering.