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Across the world this pandemic has led to more demand for online grocery shopping. There will be stickiness to this demand so more will shift to online from store grocery shopping. An analyst has outlined that the pandemic has brought forward the evolution of online grocery by 5 years for example. Ocado is the world leader in online grocery solutions. This business is far harder than delivering other goods as Amazon and ASOS do. Short shelf life, fragile items, temperature control etc pose problems. Notoriously difficult to master.
I expect Ocados existing customers will deepen their partnership with Ocado and new lucrative partnerships to emerge. The warehouse fire was a big learning point for the company and a huge stress test. Ocado emerged stronger. The pandemic experience will lead to a further valuable evolution.
There have and will always be shorters. They have though been burnt regularly on a rotisserie of flames thus far.
Very interesting JTS,
Share price seems to be strengthening a little, survived Friday's fall. As far as I can see there is AGM on May 6, no idea if any trading will be updated then. Otherwise full results early July, so quite a wait. Hard to believe they could could be anything but good, in my mind.
Seems that my last word ran over the word count limit.
PS: I do appreciate a discussion like this. Not always common on boards, but there are some good posters who dig out objectively critical viewpoints. After all, perhaps something can be brought to light which identifies an unrealised risk, which in turn presents an opportunity for taking an action to prevent unnecessary losses.
Enjoy the rest of your weekend as best you can in these quarantined times
Afternoon ADG89, first, thanks for a good response as to sharing where your logic flow is coming from. There will naturally be areas where we may just have to agree to disagree.
I note your comments on Amazon and ASOS as examples. Obviously this is not the time to visit in person, but suggest that you go online and do a bit of research into their backend / warehousing and distribution processes. You will discover that Ocado is built on the philosophy of being the next generation… It’s like comparing the latest high-speed wifi with old dial-up. They achieve the same purpose, but aren’t really comparable beyond function.
With regards to that, this is specifically why Ocado are experiencing difficulty whereas “old” delivery systems are actually able to have a more flexible response. i.e. amazon CAN just turn around and employ 100,000 new staff to boost their manual processes. Ocado CANNOT just bring a whole new series of robots onstream, and they also cannot just flood their warehouses with humans for health and safety. Hence they cannot take full advantage of this surge in demand and face the predicament of turning down a once in a lifetime (hopefully) business opportunity cause by this terrible event.
But then, it is via these “cannots” that debate emerges. Many see this as a reason to sell, or doubt the business’s future. I personally do not. I see it as the natural limitation of Ocado’s business model, the actual antithesis for Ocado’s entire investment case. Meaning that if Ocado could just expand by the desired amount, I would sell on the spike and not be a LT holder as I would no longer have an idea of what I am investing in. Certainly not a biz seeking to revolutionalise an industry for sure
The comments of some drivers have been circulated broadly by the media, yes. Personally, I’m weary of such articles as they are non-objective by nature (negative news sells) and generally give limited if any indication as to broader sentiment. Please do not take me wrong, I am not dismissing real worries of many people. But I do think that people respond to worry in different ways… Regardless, Ocado must be assumed to follow Gov guidelines, which would suggest that at any time, they may have up to a double digit %age of drivers / workers at home in self-isolation. This would certainly have an impact on performance, yes.
Equally, that’s why Ocado has engaged in counter-measures such as buying 100k testing kits for staff: https://www.telegraph.co.uk/news/2020/03/28/ocado-buys-100000-coronavirus-testing-kits-keep-staff-working/
You are quite right that should there be an outbreak which spreads within the company and shuts down a department, key supplier, hub or whatever, then Ocado SP does run the risk of being hit hard. Therein a short position would be a good place to be in. However, based upon what I’ve seen in the public domain, that sounds like a bet based on a worst case scenario, not an objective decision based upon currently known fundam
Thanks JTS, it's nice when just once in a while this BB can be used for a sensible debate!
My references to Amazon / Asos were that they will already have expensive sophisticated warehouse picking systems in place, so flagging that the market for the solutions arm will be limited in some ways.
Having tried myself I know that Tesco / Sainsburys / Iceland are all having the same trouble with order volumes but the difference in my mind is that people already know those brands and may have used online delivery on occasion (certainly my situation) whereas for many Ocado will have been a first time - so it's that first impression / interaction which has been damaged.
I do also think because of the above they may go too far in accommodating the short term demand and then end up with excess capacity dragging on the margins.
I do think there is a danger of a NEXTesque worker revolt at the warehouse or with the drivers which would obviously put Ocado on it's backside, at least temporarily, either that or they will have to come to some agreement to incentivise them to stay in post - which again will chomp into the margins, possibly permanently if they agree permanent improvements to term, see the articles below;
So fair to say my short is opportunistic and based on "news" rather than techincal / fundamentals - I'm just trying to evaluate the upside risk!
"Question for investors here, where do people see the profits getting to in order to support the current Mkt Cap / a higher Market Cap?"
Unfortunately, I think this form of question does not apply to a company like Ocado. By your own examples afterwards, Ocado should be compared to NASDAQ type stocks, like Amazon. These do not rate by traditional PE measures. Your question does not really apply well. Equally, converting the question to, what Mkt Cap would Ocado get if it were on the NASDAQ doesn't apply. Why? Cause it's not.
With regards to a short, I'd first question your timing. We are sitting in range of 1180-1250. Within this area, you have supports at the 4hr and 1day MA (50+100), as well as all of the Fibonacci retracement levels from recent high. I think you'd need an open below 1180 to have clear indication for further decline (my opinion). Even then, what's the target? Lot's more historical supports right down to 1,000. Not an easy ride....
With regards to your rationale for reduced business, I'm honestly on the other end of the spectrum. I can't see how a 1000% increase in demand and over 100% increase in business is a bad thing for key performance & financial metrics... No supermarket had 1000% inventories for paracetamol, toilet role or whatever else crazy folks were buying. I can’t see the rationale in investors who expect Ocado to suddenly increase their vehicle fleet, numbers of drivers and entire supply chains by hundreds of percent within a few days. Then what? Have everything redundant again in a few months from now? How’s that possibly a smart thing to do?
Personally, I’m looking forward to the next trading update. Anticipating a short spike after that as people recognise “increased” levels of business.
I do agree that many first timers had negative experience - like not being able to create an account or being unable to get a delivery slot. Equally, as far as I’m aware, this is true for every online delivery in the country. Not a unique situation… Rather, I view this virus as potentially setting a new trend, wherein more people will be buying online and that generates a larger market size for Ocado to tap into in the future. I don’t care if they slightly reduce market share when the size of the market doubles.
Whilst this virus is here, I’m expecting numbers to remain extraordinarily high. When the virus dissipates, I’m expecting Ocado to have a more efficient platform and operating process than ever before, and be in a solid position to secure forward growth...
Just my take. Also don’t mind hearing the opposing side though
Question for investors here, where do people see the profits getting to in order to support the current Mkt Cap / a higher Market Cap?
Even if Ocado managed to bring in £400m EBITDA annually from selling it's warehouse solutions that would be a PE of 22 based on current market cap.
I get that it's solutions can be multi-use but let's be honest the big online players Amazon / Asos have probably already spend what Ocado have on R&D and already possess systems on par / ahead of Ocado's.
Full disclosure having been suspicious for a while I'm on the verge of opening a short position as I see a good risk/reward scenario related to consequences of COVID-19 (lack of order fulfilment & loss of potential customers, increased costs when demand subsides to normal levels) so I always like to share my thoughts before doing so and hear what people on the other side of the argument think the key attractions to the business are.
Wonder whether or not recent government annoucements (about prioritising 1.5m people for home delivery) will also have impact on this...
Can understand the customer service complaints. But equally, any company that could deal with a 1000% increase in business must either work in some purely digital sphere, or have been terribly managed in the first place. Why would a company have such an excess in capacity? Under any normal day, we would label that as terrible project planning and complain about obscenely high operational costs
Whilst recognising the limitations, I do think that from an investor stand point, OCADO will gain significantly from this. Their bottom line has got to gain. Learning will be immense. And yes, there may be some people who have had a negative first impression and never return, but there will be others who have signed on and started to develop new habits of purchasing online. This is all leading into a more efficiently run and larger volume market biz op
Ocado’s first international customer fulfilment centre (CFC) has today gone live for French supermarket giant Casino.
The CFC is located at Fleury-Mérogis, near Paris, and will be operating with what Ocado called “a small number of test orders”, which will be ramped up over the coming months.
At capacity, Ocado said the depot will be able to handle a turnover of €500m and serve customers across Paris and the nearby Hauts-de-France region for Casino Monoprix customers.
Monoprix has also launched a new ecommerce service with Ocado’s Smart Platform, called Monoprix Plus, which fulfilled its first delivery through the Fleury-Mérogis depot on March 18.
That looks to be the best option in the circumstances.
I have a mid week pass so it will be interesting to see how long I have to wait - I will update if and when.
We have experienced such extraordinary levels of demand in recent days that despite our best efforts, we simply have not had enough capacity to serve all our customers.
To put it into context, practically every Ocado customer, no matter how infrequently they may have shopped previously, is now looking to place an order every week. At the same time, with families at home, the average size of orders has almost doubled. This means there is an unceasing level of demand several times our current delivery capacity.
We’ve already taken decisive steps to manage this demand, closing our doors to new customers, and limiting customers to one delivery slot every seven days. However, despite these measures, we can see that not all Smart Pass customers have been able to book a delivery.
As an Anytime Smart Pass member, we consider you to be one of our best customers, so we’ve set up a temporary priority queue to enable you to book a delivery slot each week.
How you will get access:
We have divided all paying Anytime Smart Pass members who joined before 2020 into a number of equal-sized, randomised groups. You will be placed in one of these groups.
At spaced intervals, we will give each group access to the priority queue, enabling them to quickly get in and choose a slot for their weekly delivery. We will do this by sending each group an email and text message between the hours of 9am and 5pm, starting tomorrow.
Once you get your email, you’ll have the rest of the day to place and check out your order. Please wait for your message, as you won’t be able to access the priority queue at other times.
Please be aware that there is still high demand for slots, and you may not see full availability for all time slots. But, because we can now prioritise the customers we let on to the website, and each customer can only have one slot, you can be confident that there are enough slots – and groceries – to go around.
Our developers continue to work on a better solution which will allow us to manage this in a simpler way but, for now, this fix at least helps us to prioritise you in the short-term. It makes access fair, and helps to keep traffic to our website at manageable levels, ensuring you the best possible shopping experience in the circumstances.
Please note: our usually all-knowing Customer Service team can’t set-up or change this temporary process, so they won’t be able to tell you which group you are in, or when you will get your email.
Thank you for your continued understanding and patience. We all understand the huge responsibility placed on us, and we are working tirelessly to help feed the nation at this challenging time.
It looks like demand has completely swamped the company and they're struggling to cope, guaranteed slots have been cancelled which are the die hard Ocado shoppers, current capacity is severely restricting what they can get out.
I had a look today and absolutely no slots available and the same with Morrison's also
Ocado are currently looking at alternative means of delivery via other companies to help relieve the pressure
Mondo it says very clearly in the website that no new slots are available - though I had a note yesterday saying they are now releasing slots in a daily basis. The queue is plainly for people to edit and add to slots they already have
Pickers still have to use hand scanner to clock in/out. Do you still have that vision CEO and board care about them? They are just a pawn on chessboard.
Citizenlane - you miss my point. I totally get the huge demand but why have people waiting in a queue when there are no slots available and only a 3 day window - just have that posted at the front end as tesco and waitrose do. It is all about expectation and delivery - if you are allowed to join a queue your expectation is that you can shop when you get to the front some 2+ hours later. Also - I have been shopping with Ocado for over 15 years so have a pretty good idea of how it all works!! It's a shame that they did not have some system for the loyal customers who kept the business afloat and were advocates of what a good service they usually provide. The bottom line - if you market yourself as a tech company but appear to be doing no better than a bricks and mortar store then the sharks will attack!!!
Yep, the money the warehouse staff are paid is a joke. Time to pay those undervalued but now essential workers a lot more.
Cineworld are up 30% today ... and they're shut !
Is it a joke mate?
Ocado warehouse staff and delivery drivers are now designated key workers. At this time they are under enormous pressure and they are being asked to do extra shifts to help the nation. But, whilst the majority of people are now working from home Ocado staff are potentially putting themselves and by association their families at risk by going into work everyday.
Many do all this for the princely sum of £8.97 per hour ( there is a small shift premium for anti social hours). All this against the backdrop of Tim Steiner making off with £58.7m recently. I'm not one to begrudge people being rewarded for their efforts but now is the time for Tim and co to reward all their staff who are going the extra mile for both Ocado and the nation.
in investment or trading you have to except the good and the bad days ,that is all. good luck.gold is the one to follow now.
What's the point of that Volcano?
why would I?
Ocado's website is working
i never see you complaining when FTSE 100 was down 5% and OCADO was up 10% ,lol
I am heavily invested here, so done my own research, but watching TSCO go up 8%, while we go another 1.5% down on top of previous falls. We should be 14 at least , under these circumstances.
I'm not having a go with you, I agree with all of it, but OBVIOUSLY the market does NOT agree and is avoiding them instead of hoovering them up...in the meantime OCADO themselves are pretty much silent....it just looks absolutely cr*p to me.
Nobody is sat waiting for TESCO/SAINSB to announce if THEIR website is going to work in future!!!!!
I would guess because people are interpreting volume of traffic as inefficiency. The opposite is true, and the bottom line will quickly start to show that imho. The SP will then start to reflect that also. The govt has told 60 million people to shop online for three or six months. Ocado is the most visible and trusted of brands doing that, with twenty years of deep understanding of how to deliver 95% fulfilment. There is no way they are not going to be a cornerstone in this horrible national tragedy. DYOR