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Pokerchips,
On your link Ocado look to be placed last in the FTSE 100. Can't see where you get the 93 from
Chilting,
The huge problem is Ocado is underperforming. Underperforming companies in this market are getting hammered far more than others. Personally I see conditions for Ocado worsening..
Ocado group have moved further down compared to other FTSE 100 constituents. By my rough calculations they are now ranked 101st in the FTSE. It they are ranked below 110th as at the next FTSE quarterly review (which I believe to be on 1st June) then they will automatically relegated from the FTSE 100.
Bayobach,
Re the cash on balance sheet let me expand my point. I foresee that as Ocados cash balance decreases due to stalling cfc builds, increasing development costs, falling Ocado retail revenue then the Ocado share price will fall further. As Ocados share price falls and cash reserves fall then it could be bought for a low offer at a distressed price. Ocado may chose this route rather than tapping the market for a huge cash call.
Pokerchips,
There will be some parts of Ocados tech jigsaw that interest other companies. As the Ocado share price falls lower, many months down the line, I see that another company could acquire part or all of Ocado for a low price as Ocados cash revenues and cash reserves fall...
Even Kroger are now pausing and rethinking further Ocado CFC rollouts. Kroger have previously always spoken of Ocado in glowing terms, given they are a 4% shareholder in Ocado group that's to be expected.
However now the narrative is changing..
"London-listed Ocado disappointed investors last week by signaling that its U.S. partner, Kroger, wouldn’t roll out dedicated e-commerce warehouses stacked with Ocado technology as fast as previously expected. On an earnings call, Kroger told analysts that it was taking stock of the two warehouses it has already built with the British company to understand “how you optimize that model.”
https://www.wsj.com/articles/home-food-deliverys-questionable-value-for-consumers-and-investors-41b587fb
I believe that new competing technology will emerge from many areas. The rapid delivery space will emerge with big players who will have tech that is more in tune with the increasingly small basket requirements of today's consumer. As Ocado groups cash depletes I see a good chance of them being bought out by a competitor cheaply down the line..
Pokerchips,
Yes CFCs agreed now are built in 2025 and beyond. Retailers postponing CFCs, delaying decisions leads to CFCs being built out later and impacts profits at Ocado. We agree that robotics will be seen increasingly in grocery operations. However I believe Ocados tech, which is focussed and optimised around big basket shops, will be surpassed by rivals.
Yes new customers look to the future. However will the projected new huge stream of new clients/ CFCs occur in the first place? I think the amount of CFCs Ocado builds will end up being at the low end of any projections and that new Ocado Solutions partners will be slow to acquire. This will primarily due to grocery retailers being attracted to other tech solutions than the Ocado offering.
The latest Kantor update was very poor in my view. Ocado has hung onto market share yes but at great cost. It has hugely increased its UK retail cfc capacity and has limited grocery inflation to 9%. Other grocer's have passed on 12% plus inflation to the customer. This huge cfc capacity push and choice to limit inflationary rises has pushed Ocado retail to an overall loss where others have profited.
Leading shorts such as Kintbury capital have been open about their reasoning and predictions for the Ocado share price. They forecast a 40% fall in the Ocado share price and reasoned it out as they saw Ocados operations misfiring.
Chilting, the macroeconomic forces currently are adverse but Ocado is falling far further than others. Ocado now sits at around 97th in the FTSE 100 index and is moving downwards at a rapid rate. The recent Ocado results were very poor. There are many issues currently at the company that I have outlined previously.
The Ocado retail results showed a continuing trend of customers ordering smaller baskets, online order growth slowing (hence the halt in Ocado retail expansion), customers opting for cheaper goods. These key trends are most likely occuring across the globe in a similar way where Ocado Solutions has a presence. It means existing overseas partners will most probably expand their cfc network at a slower pace and with fewer CFCs than previously estimated. It would mean less profits for Ocado Solutions if the volume of goods decreases that pass through Ocado Solutions powered CFCs. It also points towards less overseas international partners being signed up in the future as grocers pause their interest in online expansion having been putoff by the Ocado retail trends.
It's Ocados underperformance that has caused the shorters to currently scavenge around the Ocado share carcass...
Pokerchips, It's clear to me that in the absence of a new overseas contract Ocado group will exit the FTSE 100. The shorters will have this in mind and the market conditions are vehemently against Ocado currently. Once it exits the FTSE 100, the share price having further dropped as tracker funds sell the shares, that will be a time to then re-evaluate the longside potential of the shares..
Bayobach, The error re Ocado retail has been a recent one. The pandemic boom times led Ocado retail to project a vast growth in ongoing orders. They built additional CFCs in their stronghold locations, south of UK to capitalise in the great increase in orders. That growth has turned out to be a trickle rather than a stream. They thought they could get around to building CFCs in other locations later on however now funds for expansion have dried up leaving lucrative areas of the country without Ocado services, Scotland etc.
Of course the cost of living crisis, Ukraine war etc has been a surprise to all however Ocado retail risked a lot by investing so strongly in their huge expansion. That risk has been brutally exposed..
Bayobach, I have researched Ocado for over 10 years. Was an investor early on. The lack of profitability for Ocado group is as expected, although it's a worry profits are being further delayed. Ocado group has consistently invested heavily in its technology and warehouse builds in order to profits in the future. The lack of profitability at Ocado retail on the other hand is a big red flag currently. See my previous posts for further explanation. Over expanded in wrong geographical areas, leaving currently underutilized CFCs.
Personally I see a continuing period of decline for the share price. It's in a perfect storm of rising costs, high inflation/interest rates, consumer changing behaviour - cutting costs, low level of new overseas partners and mismanaged Ocado retail operations.
I'm always interested in the company, it's a fascinating enigma that many don't understand. My research has outlined for many months that Ocado shares are to avoided. Currently I don't forsee a change to that outlook..
Chilting, The major shorts are remaining consistently short Ocado and simply rolling over their positions. They look to be long term short Ocado rather than short term opportunists.
The recent results missed market expectations on every level. Ocado retail is losing cash daily and its mismanaged expansion leaves it unable to tap into new geographic markets. New overseas partner sign-up has been very slow. Enduring inflationary market conditions are leaving interest rates higher for longer, increasing the cost of Ocados future financing.
It's little wonder they are short.. Long holders more likely to close their positions than shorters imo...
I have knowledge of company share schemes. The administrators of such schemes do not manipulate the companies share price for the benefit of such schemes. It would be fraudulent were they to do so..
Yes, that will be the acid test chilting. In my view this capacity won't be filled any time soon and will weigh on Ocado retails balance sheet for many months and beyond.
They could build a Scottish CFC but they can't afford to at the moment. Leaving competitors to build market share and cement their market positions in that locality. Potential profits for Ocado retail lost.
You don't understand the consumers obsession with price. However this cost of living crisis is forcing everyone to reassess costs. With grocery inflation at 17% even the wealthy are moving supermarkets and choosing cheaper suppliers. Ocado retail are at last realising this as they are putting n place a match with Tesco price guarantee on some products. The cost of this though will further erode Ocado retails finances. They are left with little choice though, it's either go down market and price match or sit with many greatly under capacity CFCs..
Ocado retail has managed to hang onto its market share but this has come at great cost by absorbing costs rather than pass them on (Ocados grocery inflation has been 9%) and by greatly increasing its cfc capacity to service customers. End result Ocado retail is now losing £££ every day..
Ocado retail, the 7th most expensive supermarket in the UK (out of 8 existing supermarkets - Which survey 2023), has overexpanded hugely in areas where it is already present and has now had to cancel expanding expanding in areas of the UK where it has no presence, Scotland etc.
Building, servicing, running this extra capacity is a huge drag on Ocado retails balance sheet. This extra capacity, as it's in the wrong geographical location, isn't due to be filled any time soon..
Yes, it's been a very costly miscalculation by Ocado retail. Too much expansion, and in the wrong geographical areas too. It will weigh on Ocado retails profits for years.
An online marketplace to store 3rd party products? They may do this. From memory the newly planned French CFC has this model. Carving up and utilising the existing CFCs in the UK to accommodate this would be complex as they have been built for their specific function of serving the Ocado retail delivery model. Ocado will I'm sure be looking at every conceivable way of utilizing the huge overcapacity they have. No easy solutions though.
The multi storey Korean CFC model. It's very innovative. Ocado are an extremely innovative company. However many, many extremely innovative companies around the world come and go every year. Issues such as out of control costs, customer changing environment, over expansion and competition from other tech companies will continually derail Ocado in my view...
It's a large miscalculation on Ocados part. The increase in orders was extrapolated from their pandemic sales figures. They believed sales would hugely rise year after year. The cost of living crisis and Ukraine war has completely popped this bubble. Of course you can't foresee these events however Ocado were overly aggressive in their expansion approach imo.
Ocado have tried to put the brakes on their expansion but much of the expansion is already done leaving vastly underutilized warehouse robotic operations around the country currently. Very costly to build, maintain and service...
https://www.ft.com/content/bf79741d-7530-4865-b4e1-51a6fa098a38
Yes Ocado retail has gained a lot of new online customers. This has been due to Ocado opening new, very costly CFCs in order to increase capacity.
As Nils Pratley puts it "The gap between capacity and the actual level of sales at Ocado is enormous. A new distribution warehouse opened in Bicester this year and another is coming soon in Luton. At that point, the company says it could make 700,000 deliveries a week, equating to annual revenue of about £3.9bn. Actual orders last year were more like 400,000 a week and turnover was £2.2bn"
Ocado are being forced to lower prices in order to try and to their huge excess capacity to work. I see ongoing losses or very small profits at Ocado retail for months to come..
Yes, they are trying to drive sales with the Tesco price match. This will eat into their margins and profits, or as is currently the case at Ocado retail, increase the losses. There's a huge overcapacity at Ocado retail so they are trying anything to drive up sales and keep the robots busy.
Dropping out of the FTSE 100 I see as around 6-9 months away. Of course this is provided no new contracts are signed. Ocado retail I believe will incur further losses and a lack of new overseas partnerships will further erode confidence in the share..
Not sure it will hit that low but with a current market cap of £4.41bill Ocado is now around 90th placed in the FTSE 100. I see it dropping out of this index in the coming months leading to a deeper fall in the share price..