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Customers vent anger at Ocado meltdown with complaints about delayed deliveries and product substitutions
By DAILY MAIL CITY & FINANCE REPORTER
PUBLISHED: 22:05, 2 April 2020 | UPDATED: 22:05, 2 April
A few observations from yesterdays shop-
All promotions have virtually disappeared - most products are being sold at full price.
There are obviously supply issues on lots of products but substitutes can be found for most things.
Ocado are restricting the amount of product that you can buy on a whole range of products.
Its very easy to run up a big bill very quickly!!!
Still no slots available for me
I just managed to get a slot and ordered for delivery tomorrow - the first time in about three weeks - I have a midweek smart pass.
I disagree, based on my experience online is not the best option, if I had to rely on it I would end up starving to death.
I think that its fairly obvious that corvid 19 has massively enhanced Ocado's prospects.
Ocado are the world leader in internet grocery solutions - retailers around the world have seen that online is the best option - consumers around the world have seen that online is the best option.
The only failure has been lack of capacity - Ocado now have the solutions ready to fill that capacity.
The 1-2billion net profit it will be getting once it has built all of the fulfilment centres as a result of being paid a percentage of revenues from it's partner retailers.
Ocado has never traded on fundamentals which is were the shorts come a cropper
Where's the company going you should ask - not where's its been
Fundamentals are only a part of share price valuation. A share's value is mostly driven by what is expected in the future, not what has happened in the past. If you don't realise this then you probably shouldn't be investing in shares until you have more knowledge.
I am trying to value Ocado. I looked at the fundamentals on Hargreaves Lansdown at https://www.hl.co.uk/shares/shares-search-results/o/ocado-group-plc-ordinary-2p/financial-statements-and-reports. Share capital £14.2M, share premium £705M, shareholders funds 1048.9M. Shares in circulation 711820000M. Thats around 248.43 pence a share, assuming no future profit(probably pessimistic after the Covid boost) . So where does the extra 1000p of Ocados share value come from... unless something in this data is wrong?
The AGM will more than likely be postponed - most other companies have - will probably get an RNS soon.
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.
*fundamentals
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;
https://www.newsshopper.co.uk/news/18330957.i-terrified-spreading-it-erith-ocado-driver-slams-company-response-virus/
https://www.newsshopper.co.uk/news/18337507.second-erith-ocado-worker-speaks-lack-virus-precaution-delivery-depot/
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
Hi Chaps,
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.
Thanks
Aaron