Not true poker chips, Ocado pay the great majority of the CFC build costs. Then they recoup these costs in the main via receiving a percentage of the value of the goods that pass through the CFCs.
If you look back at the history of Ocado when major contracts have been signed Ocado have carried out a corresponding cash raise. More recently Ocado have carried out cash raises independently of major contracts being signed.
Providing the upfront capital is Ocado's way of enticing clients to sign up to ordering the CFCs. More enticing for grocers to pay later via volume fees than stump up hundreds of millions at inception of the contract.
Concerns re slow CFC rollout and the recent Kroger spoke closures (as I have highlighted at length previously) are driving their reduced forecast.
"Ocado shares target trimmed by CFRA amid Technology Solutions concerns"
https://ca.investing.com/news/company-news/ocado-shares-target-trimmed-by-cfra-amid-technology-solutions-concerns-93CH-3353503
"The adjustments come as Ocado's current roll-out of its Customer Fulfilment Centre (CFC) is progressing slower than expected and is unlikely to meet the full-year estimate previously set out by analysts.
Ocado's key partner, Kroger (NYSE:KR), has also shifted its strategy, moving away from the initial goal of a home delivery service. This change in direction has led to the closure of three Ocado-powered spoke facilities. Although these closures are relatively minor in the context of the potential CFC order pipeline, they are perceived as a negative indicator of future performance."
Bet 365 is a private company. The owners can set their own levels of pay. Very different from Ocado
Ocado group is a public company owned by its shareholders. The board of Ocado should be setting appropriate bonus pay awards which have a link to the company's share price performance over the given period. Rightly there will be a lot of disquiet at this years Ocado AGM re the pay awards given the dismal share price performance of late.
If you just skim the surface the Ocado retail picture looks rosy. Dig deeper though and there are big issues. Due to wildly optimistic CFC builds, Ocado retail has around 25% spare capacity. This has created a huge fixed added overhead for the operation. In order to try to fill that capacity a little (fully resolving the issue will take 3 years according to Marks and Spencer's) Ocado have dropped prices below food inflation levels and run a huge coupon campaign offering discounts to customers. This has lured extra customers in but has led to no change in guidance re revenue and EBITDA in the last Ocado retail statement.
The other part of his bonus structure linked to the share price reaching £29 is less of an issue. It's the below which is highly contentious given that he will get a £5 mill bonus whatever direction the share price goes in...
"Steiner would also be able to receive an award worth 600% of his base salary, or almost £5m, even if targets for total shareholder returns and other performance measures are met but the share price goal is missed."
One issue that shows how Ocado is not bring run appropriately currently is Tim Steiners (Ocado group CEO)s upcoming proposed bonus pay structure. It's under discussion currently, will go to a vote by shareholders at the Ocado AGM.
It's very contentious given the recent abysmal Ocado share price performance, the group losses, issues on major contracts etc that have given rise to the fall..
"Steiner would also be able to receive an award worth 600% of his base salary, or almost £5m, even if targets for total shareholder returns and other performance measures are met but the share price goal is missed."
https://www.retailgazette.co.uk/blog/2024/03/ocado-15m-ceo-bonus/
Absolutely AquarianAge.
Shorts act as check in balance. Where a company is run well shorts lack presence. Where a company is failing then shorts start to mass. They can be an excellent warning sign for private investors of issues within a company.
You should invest in Asos. Even more shorts there than Ocado have. That share price is bound to increase right?
Shorters have rightly seen the underlying issues within Ocado and their recent results and capitalised on it.
These are small signs of normal activity for Ocado Solutions. Nothing big enough to move the share price up or obscure the far larger negative issues within the company. You simply need to look at the share price to see the extent of challenges Ocado is facing. Most will ignore this however and rise up against any negative talk when the trend line is blindingly obvious. My previous posts have outlined the negatives.
Smokinjoe,
Have you carried out any of your own research you'd like to share with us? You posted about Ocados recent results which were a strong update according to yourself. The Ocado share price has plummeted since then as of course they were the opposite...
My commentary re Ocado is stating the obvious. Most ill informed private investors prefer to ignore all negatives though.
Most probable outcome to below events...
"Sainsburys financial update - 25th April - Little effect on Ocados SP
Ocado AGM - 29th April. Tim Steiner gets his pay award through just after a large shareholder rebellion
Kroger Update - 8th May - Very little positive news for Ocado from Kroger
M&S financial update - 22nd May - No resolution to the Ocado payment. JV still underperforming. 25% overcapacity of Ocado retail outlined by M&S previously has reduced a little but will take more than a year more to resolve.
Ocado - HY results - 16th July. Ocado retail disappointing, v small profit. Ocado group large losses obscure increase in overseas solutions income.
Obviously it shows the Ocado solutions model hasn't worked for Kroger breaking into new markets as it had hoped. Read across is that Kroger will build far fewer Ocado spokes in the future and be hesitant about moving into geographies where it has no physical presence. Other potential grocery partners overseas will pick up on Kroger's dissatisfaction with the Ocado spoke performance.
A continuation of the obvious downtrend for the share price. Negative issues in Ocados 2 major contracts. Kroger closing Ocado spokes, M&S threatened with the prospect of legal action. Huge overcapacity issue at Ocado retail hampering profitability. Large annual losses still being recorded by Ocado group. Chairman leaving. New grocery partner sign up very slow to Ocados solutions etc.
Iranian drone attacks. Stock market slide. Oil price spike, Ocados delivery model is a heavy consumer of fuel as it delivers to customers from heavily centralised hubs. Risk assets sold off. Ocado share price drop continues.
It's this element of Tim Steiners proposed pay that's the most contentious...
"Steiner would also be able to receive an award worth 600% of his base salary, or almost £5m, even if targets for total shareholder returns and other performance measures are met but the share price goal is missed."
https://www.retailgazette.co.uk/blog/2024/03/ocado-15m-ceo-bonus/
Punters are just buying in for speculation however the direction of travel re this share is obvious.
Negative issues for Ocado on their major 2 contracts, Kroger and M&S. Huge overcapacity at Ocado retail. Recent large Ocado group annual loss declared. Very slow sign up of new Grocery partners. Chairman stepping down. Interest rates predicted to stay higher for longer after recent data.