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The consumer is more and more requesting a smaller amount of items to be delivered in a shorter time. This damages the economics of the Ocado model and boosts the ultra fast delivery model.
Let's see how things pan out in the coming months
Ocados model is to finance the majority of CFC build costs up front and receive revenue from some up front fees but mostly from fees received as a percentage of the value of the goods that flow through the CFCs. The contracts are not public information but this info is what has been outlined before when contracts have been announced.
Many brokers see the ultra fast delivery model severely eating into Ocados revenues/market share. I'm not saying I fully agree with that but it's a possibility. Below are a few articles with info, there are many more out there:
We differ in opinion, great, that's what discussion boards are about, best of luck
Just in time grocery delivery is a different scenario but it is a method of delivery that the customer is increasingly requesting. I believe you are underestimating their capacity for growth and expansion. As their networks have grown costs have fallen. The economics around costing re just in time delivery is very opaque, just as Ocados contracts and tech costings are.
From Ocados final results:
Total capital expenditure for the Group is expected to be around £800 million driven by accelerating roll out of OSP worldwide
? 30% UK, of which 60% dedicated to the continued roll out of CFC and Zoom sites, inclusive of land, build and MHE cost, given consolidation of the Ocado Retail joint venture
? 50% International, reflecting an additional 8 CFCs to go-live during the year, of a total of 13 CFCs in build internationally at the end of 2021
? 20% Technology investment to support key areas of OSP platform development including additional focus areas such as autonomy
Ocado is burning through cash at a great rate.
True energy and fuel will be hedged but in all likelihood after their current hedging period those costs will remain very high.
From memory the reimagined tech is available on CFCs that are due to be completed in 2024+. It will be a cost save from then on but it is already public knowledge and the extent of the cost save has been announced in the reimagined presentation etc. The info is already baked into the share price.
Costs until 2024 will remain at a very high rate, a cash raise will be needed before then. The cost of CFC build from 2024 will reduce but the cost of tech development will still be sky high. Current costs will be rising ever further due to wage increases, CFC build extra costs, fuel and utility bills at high rates etc etc
Sure Pokerchips. However given that Ocado retail sales are continually sliding are overseas grocery partners looking at different internet grocery models which are growing faster? Preferring partnerships/investment in the just in time online grocery delivery model (getir, gorrillas, deliveroo etc) rather than the Ocado model which is focussed on a full basket shop?
Ocado in a very tight spot currently.
Today is the second time Ocado retail has downgraded sales forecasts this year. The market will now be thinking will it happen again in the coming months? With these downgrades are further international partners being put off joining up with Ocado?
Good news that the Ocado retail UK expansion plan is rolling out well and that Marks and Spencers remain fully committed.
Lower EBITDA on Ocado retail means less funds for the Ocado solutions arm (Surplus funds are passed from Ocados retail arm to its tech arm to develop that side of the business further). So again the anticipated cash call on shareholders is becoming nearer.
Ocado management are extremely capable and may well be able to pull off a surprise i.e a big new contract, new finance partner etc but for now the outlook is very gloomy.
Best to all
The probable cause of today's drop...
None of us are committed to post constantly on this board. We do so whenever we wish towards the main aim of listening to others and increasing our knowledge. When I sold out I went on a superb extended holiday. Always good to have a break from the banter and at often times abuse that gets thrown around on share chat boards.
I would love to read any analysis you have on Ocado, do you have any for us all to think over?
Since buying Ocado shares at the mid £3 level I have always spoke my mind. I have been positive re Ocado for a lengthy period, sold out recently due to grave doubts re the overall economy. No deception here, just my thoughts and trading activity. Happy to have profited overall...
As always DYOR...
Those were my thoughts at the time SFH. I still believe Ocados tech to be of great value and improved after reimagined, as do many others on this board. Overall though we must make up our own opinions on investments/technology rather than rely on others.
However the worlds economic environment has change immensely from then. The war has lit a toxic inflation/interest rate spiral which is hugely damaging to Ocados prospects. The overall economic environment left me with the decision to sell.
Ocado has been a very profitable investment for me as the great major of my holdings were bought at £3.40. Missed the top re this share but so have many, many others. The covid period was a once in a lifetime occurance that left many investors with deep losses across the entire FTSE. I walk away with a healthy profit to reinvest in Ocado at some point or any number of other interesting investment opportunities. Other retail shares such as Marks and Spencer have tumbled 48% from their high but investors there are still hold on waiting, hoping, for a bounce..
To belittle others and try to tag them with mental health issues only reflects greatly on the originator of the comments.
Best of luck to all
The current dire economic forecast necessitated a re-evaluation of my outlook for Ocado. I had no need to sell but I could see the forecasts for Ocado becoming increasingly challenging. Kantar have just released Ocado retails latest estimated sales figures today and they are down 8%. I could have just sat it out hoping for a reverse but glad I sold out when I did.
Good luck re your continued hold strategy. I have a very negative view of the overall market conditions for Ocado. Ocado as a company though I have great respect for. The company has been a very profitable investment for me and has great potential for the future. Currently though I believe the best place to be is on the sidelines regarding this share.
I say things as I see them, as we all do on this board. I've been positive for a long period. Currently am negative re Ocados outlook and have sold my holding due to my current analysis. Hope things work out for you.
I have many aspirations, being Neil 2.0 though is not one of them.
Best to all
Prior to the war it was forecast inflation and interest rates would rise moderately. Of course we were at multi year lows so that was to be expected as the economy came back post covid. The huge unexpected jolt to inflation and interest rates though has been the war. Fuel and food inflation off the charts contributing to rising inflation elsewhere.
This jolt causes incredible issues for Ocado. Grocery consumers cut back in all areas. Very high fuel prices makes the Ocado delivery model more expensive. The current economic environment is one in which overseas grocers do not want to commit to lots of extra funding projects..
The Myrmex buy was good news. It has brought forward even nearer the day Ocado will again need to raise cash from its shareholders but it shows Ocado still have ambition, still are sticking to their plan of always improving, shows the wheels are not falling off the company, yet.
Still though the incredibly dire current economic conditions endure. Inflation and interest rates rampant. Chief cause, the Ukraine war, shows every sign of lasting another year or more.
Tomorrow is Marks and Spencers results release. I believe the current trading and forward guidance for M&S and any read through to Ocado retail will disappoint.
Walmart and Kroger are investing but their situation is becoming under great stress. I believe they will cutback in some areas to safeguard their core business.
Don't get me wrong, I am a great fan of Ocado. Their service is the most comprehensive, polite, on time, least substitutions etc of all grocery retailers. Key to the consumer though is that Ocado services can never be described as cheap. It's the cost save that consumers are flocking to under current extreme economic headwinds, wherever that may be.
Walmart and Target have issued very disappointing recent results and they are very robust retailers. Key retail bellwethers. Consumers currently are cutting back and seeking out cheaper options across the board such as warehouse retailers..