Ocado eyes tech growth amid pandemic boom in online grocery sales

Ocado has revealed it is in talks with a “large number” of retailers internationally about new technology partnerships while reporting a renewed surge in online grocery sales.

The company, best-known as an online grocer through its partnership with Marks & Spencer, is also a provider of robotic warehouse technology.

The latter part of its business has been the main driver of a remarkable share price hike in recent years, that saw it outstrip the market value of Tesco – a grocery rival and the UK’s largest retailer – last year.

Chief executive Tim Steiner told reporters on Thursday that while Ocado was in negotiations with several retailers, it had proved difficult to strike deals because of restrictions on travel imposed by governments globally due to COVID-19.

“Those difficulties are hopefully starting to subside, or at least information about starting to subside is starting to come out. It’s not yet easy to get anybody into the UK and out of the UK, and it’s not yet easy for us to travel around the world in a way that it was pre-pandemic,” he said.

The Ocado Smart Programme is already rolled out in partnership with many big names globally including Kroger in the United States.

But progress in securing new business over the past year has been thwarted by coronavirus disruption.

Ocado, which reported last month a leap in sales and profits during the financial year to 27 November 2020, credited much of the growth to surging demand for online grocery deliveries in the run up to, and during, restrictions to curb the spread of the virus in the UK.

It said on Thursday that the business, which was run with Waitrose until the new deal with M&S kicked in during September, saw revenue rise almost 40% to £599m in the first quarter to 28 February.

The company, like rivals, has been forced to invest in additional capacity to help cope with demand, which the industry expects to remain in a post-pandemic world.

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But shares fell more than 1% in the wake of the trading update.

Sophie Lund-Yates, equity analyst at Hargreaves Lansdown, said it reflected investor concerns that Ocado may have peaked as the UK looks to move to a vaccine-led exit from COVID-19.

She wrote: “The pandemic provided a forceful tailwind for the online grocer, and its equal partner M&S.

“As we start the slow journey out of lockdown though, the hard work begins.

“Comparisons compared to this time last year when people were stockpiling will be a lot tougher.

“As such, retail revenue and profits are expected to grow at a slower rate.”

© Sky News 2021