Member Info for Sangijuelas1

The article that mentions the CFRA research was written by an AI bot.

It contains the following quote

"Ocado's key partner, Kroger (NYSE:KR), has also shifted its strategy, moving away from the initial goal of a home delivery service."

Someone had better tell Kroger this as they don't seem to be aware. They were cheering online sales growth of 12% recently. On their investor call they said they are effectively in the 1st innings of a World Series in terms of where they want to go with growing sales online. They believe that in future they may get a lot closer to in store revenue.

One of the Miami warehouse employees on Reddit said they are going to open a new warehouse in Cocoa Beach and there are job adverts posted for that in the last few days.

Apparently order volumes were higher there

This Reddit thread is pretty informative. Worth reading replies to any of the comments.

A number of unhappy customers who were sad to lose the Kroger delivery as very good service.

https://www.reddit.com/r/kroger/comments/1bodhs9/kroger_delivery_closing_spokes/

Are you for real? CFCs were the only thing of interest to anyone and no one cared much about spokes or was aware of them.

I have also never heard anyone talk about 40 Kroger CFCs.

One reason for opening spokes was to use up spare capacity at the CFCs. Now it could be that they have had demand increasing in areas closer to the CFCs making the spokes somewhat surplus to requirements.

In an article on the closure of the Miami spoke it said they are going to be opening another warehouse (spoke) in Florida shortly.

On Reddit there is a thread with customers and employees discussing the spoke closures. One employee said it was because volumes were not high enough to justify the miles and that Kroger failed to do any marketing.

Also Miami residents are more likely to want small same day delivery rather than larger next day ones. Competition is intense there with Aldi and Public.

As for Instacart they are fine for small baskets but there vans aren't refrigerated so limited for cold or frozen food.

Also if you are interested in nuance then I am surprised you don't mention Kroger celebrating significant online sales increases on their most recent investor call.

VP- this has been explained to you already.

Kroger said that closing the spokes has zero impact on the red of the CFC and spoke network.

The spokes are nothing more than sites where lorries with orders packed at the CFCs are transferred to delivery vans.

They do this to increase the reach of the CFCs for example to 200 miles from the CFC.

This didn't work at the sites in Florida and Texas because Kroger has minimal brand recognition there and they messed up the marketing.

If what you say about closing spokes is true then perhaps you can explain why opening spokes has never led to SP rises?

Yeah but you would think they could have pushed harder

Given the hit that markets have been taking this week it's surprising that shorts haven't been more aggressive?

VP does have a better understanding than most here and it's good to get a contrarian view to help challenge.overly optimistic assumptions.

I can learn more about the company. As I am a growth investor this for me is one of the few investable UK companies.

I do think they will end up getting bought out. They are a global leader in warehouse automation and you can't take that away from them.

The smartest guy in the room, eh?

Yeah but VP. About 2 years ago you were saying this was undervalued when it was £11

Yeah pretty much all the questions on the last investor call were about the Solutions business.

Ocado Retail is just a distraction and keeps it at a supermarket sales multiple rather than a robotics/tech company one.

Was just looking at the Alcampo deal. Their Madrid CFC is due to go live in the summer but they have already been using ISF in their own stores and also dark store sites.

They quoted a spend of 17m EUR to put this in place so an indicator for the revenues for Panda in Saudi Arabia and Auchan in Poland.

They are marketing ISF as a potential step on the way to building online demand in areas where online is low to later justify building out a CFC

This article mentions how Autostore had to add warehouse automation as a service instead of trying to keep billing up front due to demands by their customers.

https://www.nanalyze.com/2024/03/autostore-revenue-growth-slows/

The M&S dispute arise from extraordinary circumstances due to COVID. Targets were missed because capacity was cranked up but Ocado say that they agreed the increased capacity with Marks, which should be taken into account when assessing the targets missing

From the transcript CFO Daintith (ex Rolls Royce funnily enough) was asked if they had thought of passing capex costs to customers and said had been considered but they decided to stick with current business model. Apparently partners do put up a third of initial capex so some of the liability would be for that as well. For example, Coles and other sites under construction.

So while investors fret about Kroger closing spokes in Florida they could be drawing down modules elsewhere

Looking at the transcript of the last investor call I think those contract liabilities are where sites have been completed but not all the available modules have been drawn down.

So a CFC site built and paid for 5 modules of capacity is only using 3 so until the other 2 modules are drawn down they don't get to count it as revenue.

Which explains why they are so focused on working with partners to get the additional modules drawn down.

I agree completely over the spokes closure. They tried to use capacity at an existing CFC to extend their reach. It didn't work so they scrapped it.

Part of the reason was limited Kroger brand awareness in those areas and their marketing efforts didn't bring in enough orders.

Ocado Solutions business model is to offer a warehouse automation platform as a service. So they get some upfront payments as an incentive/contribution and then build and run the warehouse using the platform.

Doing this upfront and then getting a percentage of future sales that are in the billions plus platform use fees is lucrative once they have the right number of CFCs up and running.

That's why if Kroger did want to build out more Ocado would probably need more cash but that would be seen as a major positive in terms of moving them into strong profitability.