The next focusIR Investor Webinar takes places on 14th May with guest speakers from Blue Whale Growth Fund, Taseko Mines, Kavango Resources and CQS Natural Resources fund. Please register here.
One of the criticisms Kroger analysts have made are of Kroger's strategy. Rather than just buy tech upfront and then keep all future profits from digital sales they have to share sales revenue with Ocado.
So maybe the Ocado model is not as dumb as people make out. As well as getting the development fees they are setting themselves up for significant revenue streams in the future as more CFCs get up and running. I think this is the point Baillie Gifford are making when they say the business model is often poorly understood.
Lotte could also become a client of OIA as they have non grocery e-commerce business and also maybe in store fulfilment at their sites in Vietnam and Indonesia.
According to this the first Korean CFC is bigger than any of the Kroger ones- their largest was 375k square foot.
https://koreajoongangdaily.joins.com/news/2023-12-05/business/industry/Lotte-Shopping-breaks-ground-on-Ocadopowered-robotic-warehouse/1928264
He confirmed what I thought about the South Korea Lotte deal. SK has the highest online grocery market penetration at close to 30%. Lotte selected Ocado for 6 CFCs and they are a company with a strong background in automation in a country with a lot of highly advanced tech already in place.
Interesting contrast with Japan where online penetration is much lower at around 3%. Can Ocado's partnership with Aeon Next there help to increase online market share? You would think some of Japan's densely populated areas would be ideal for the Ocado delivery model.
As for Autostore they are focused on deploying their tech in smaller fulfilment centres with a much broader spread of sectors. Thanks to the investment in the Reimagined tech, Ocado can now position themselves as direct competitors to them in industries such as consumer packaged goods and pharmaceuticals. The Reimagined kit has brought down the cost and it's modular nature means it can be deployed with greater flexibility.
Off the top of my head it was only about 7-8 years ago that Ocado really turned their attention to selling systems to other grocery. They are projecting revenue from Solutions of about £500m for 2024. If they can increase that to £1bn or more over the next couple of years then the EBITDA contribution will increase greatly. Logistics is not expected to grow and Retail will be unlikely to deliver a margin of much more than 5%.
As Bernstein's William Woods said on the video the market seems incapable of valuing Ocado given the wild fluctuations in the SP. I think the current malaise is down to a mix of things like shorts betting that negative press can generate a death spiral down, the lacklustre UK market that has seen a number of companies either get bought out or opt to list in the US.
Obviously my optimism could be greatly misplaced. For all I know the OIA sales team could be running round like headless chickens with no strong strategic direction. Or they really have already reached the peak in terms of finding international grocery groups willing to sign up to the CFC model.
If you check that Bernstein video I posted he said 10% of investor interest relates to Retail, the real business is Solutions.
Https://markets.businessinsider.com/news/stocks/ocado-group-s-promising-cash-flow-improvement-and-market-expansion-opportunities-a-buy-recommendation-1032676655
This video is very much in line with my thinking from the Bernstein guy.
https://m.youtube.com/watch?v=0wJaTKjCX-Y
It's like Kroger are committed to building additional CFCs.
They have put things on pause. If I pause a movie to get a cup of tea that doesn't involve throwing the TV out the window.
They literally seem to be copying the research posted last week on that AI site.
Sorry but in what world does a broker note from HSBC strike a serious blow to a business?
Fluff
Seriously the Reddit forum was made up of disgruntled workers that had lost their jobs.
They were criticising Kroger but what they were saying was in line with what Britain Ladd and others said about the spoke closures.
You can get a useful idea from talking to employees. I asked one of their drivers the other day how many loads. He said 24, which is their efficiency target. If he had said only 10 or 15 then that's a negative indicator.
Not at all. I guess I feel that I have posted too much things that I find of interest but probably not of interest to others.
In seeking out responses to VP I have found out some stuff.
I believe you do have to have the investment case and optimist beliefs pulled apart.
It's just when the same points are made again and again......
Maybe some are happy with imprecise info supplied by VP and think it shouldn't be questioned.
I try to say things that reflect uncertainty by using words like May or Could.
If VP says Amazon have a partnership with Autostore and the reality is that they are just trialling their tech at one location then I am going to keep calling them out.
There is a filter if you don't like me doing that.
No but things like that are interesting. They show that OIA is attracting attention.
Not my bag thanks.
Funnily enough 2 of their main customers DHL and Johnson & Johnson liked Ocado Intelligent Automation posts on LinkedIn in earlier this week.
I believe that Ocado's closest competitor is fairly relevant.
Especially with their £4bn valuation on falling sales and no guidance for 2024.
Well Ocado Solutions grew 44% with 15-20% growth projected for 2024.
Why is Autostore revenue down if sales are there to be made,,? And they won't even offer any guidance for 2024.
Sad that they reported a revenue drop of 7% YoY the other day.
So you will be buying Auto store stock then?
Https://www.thegrocer.co.uk/ocado/why-would-amazon-want-to-buy-ocado/680734.article#:~:text=While%20optimised%20for%20picking%20groceries,major%20ambitions%20in%20online%20grocery.
Goldman Sachs and JPM mentioned here.
As well as the tech Amazon would value the data very highly as most of their consumers are fairly affluent.
The Times report at the time mentioned 2 investment banks assisting with preparing a bid .
They are not partnered with Autostore. They are testing Autostore tech at a site in New York.
Maybe they will want to test the Ocado system as well?
I don't think any of the major shareholders are looking to sell for the next few years.
I think the Amazon bid was sounded out and rejected.