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Logical that Ocado shares are marked down further given the major issues at the company. Huge overcapacity at Ocado retail, issues that will take years to put right delaying Ocado retail profits. Kroger canceling various spoke delivery locations admitting Ocados delivery solution had underperformed. Overall losses at Ocado group ongoing. Slow sign up of new grocers to Ocados new reimagined technology etc.
Morgan Stanley reducing their price target off the back of the news re Ocado chairman stepping down is an obvious move on their part imv. That news could only be interpreted as a negative to add to the numerous other negatives surrounding Ocado shares currently.
Https://www.asktraders.com/analysis/ocado-shares-continue-decline-heres-why/
"Following the news Thursday, analysts at Morgan Stanley cut their price target for Ocado to 345p from 375p, maintaining an Underweight rating on the shares."
"admitted Ocados online grocery delivery solution has had disappointing results in 3 locations regarding breaking into new markets where it does not have physical stores"
Above is amended. It's my quote. The Ocado delivery solution failed to deliver for Kroger in these 3 instances so the facilities are being closed. The spokes delivered in locations where Kroger stores were not present.
"These facilities did not meet the benchmarks we set for success."
Above is a direct quote from Kroger re the 3 cancelled Ocado spokes.
Of the flurry of recent negative news re Ocado the closing of 3 Kroger spokes was the most standout bearish signal. Kroger, Ocados largest partner in the world, admitted Ocados tech has had disappointing results in 3 locations regarding breaking into new markets where it does not have physical stores. The read across is that Kroger will be more cautious in ordering tech and won't use it across such as a large geography as had been previously envisaged.
Meaning slower, less cash flow for Ocado from Kroger. Others will be reticent in becoming an Ocado partner given Kroger are cutting back on Ocado tech.
Further downside for the share price from here imv.
He's seen a brighter future elsewhere. Given the current issues facing Ocado it's a logical excellent move for him to jump ship. Personally I think it's a very fair assumption that he sees the probability of huge new contracts for Ocado as low. The market also is interpreting the news this way in marking Ocado shares down against the backdrop of a strong FTSE today.
He thinks about his pay for sure. If he knew upcoming large new contracts to be signed by Ocado then he would be motivated to stay. Share options etc would rack up immensely if Ocados share price rose sharply from here. As said it's not a big negative sign but it adds to the cluster of negatives surrounding Ocado currently.
Fair enough re your views both however the chairman imv wouldn't be leaving if he knew big new contracts were upcoming. The market feels the same hence the knock back to shares today. It isn't a major negative. It is though a negative to add to the M&S potential law suit and underperformance of Ocado retail, the closing of spoke sites by Kroger, the continued high level of losses etc etc
The facts are that 3 Kroger spoke sites are closing.
"A spoke site has no bearing on the overall Ocado solution performance."
Obviously it reflects badly on the Ocado Solution model. Considerable cost and development time has been used up in creating these now redundant spokes. Clearly Kroger are finding it harder than they envisaged to break into grocery markets where they have no physical stores using the Ocado Solutions model. The read across is that any further Kroger Ocado rollout will occur in a slower manner and across a smaller geography than previously thought.
If Ocados technology "did not meet the benchmarks we set for success.” to use Kroger's words, then it's unlikely imv that Amazon will step in. Amazon are already successfully utilizing other grocery delivery technologies.
Kroger partner with other online grocery delivery firms, Instacart and Shipt for example. A logical assumption after todays news is that Ocados share of Kroger's online delivery pie will be less than previously thought.
Yes, as outlined they are spokes. The fact they are closing shows poor customer demand and an underperformance of Ocados solutions.
As these centres close Kroger could, if truly committed, mention upcoming new CFC commissions but they pass up that opportunity.
Kroger, as 5% shareholders of Ocado group have to voice their support for the rest of their Ocado CFCs. This though has to be put in some doubt after today's announcement.
Not a good indication for the future of Ocados Kroger relationship, also it won't help attract new grocery partners to sign up to Ocados delivery solutions.
https://progressivegrocer.com/kroger-closing-3-ocado-powered-e-commerce-fulfillment-centers
"The Kroger Co. has come to the end of the road with three of its e-commerce fulfillment centers. Ocado-powered facilities in San Antonio and Austin, Texas, as well as one in Miami, are set to close on May 25, with a spokesperson for the grocer saying they “did not meet the benchmarks we set for success.”
“Kroger’s commitment to innovation means that we test and learn quickly to identify the most effective ways to deliver fresh, affordable food to our customers,” said the spokesperson, adding that despite its best efforts and support from new customers, the facilities did not see the type of success the grocer expected."
Ocado has lowered grocery prices over the year significantly lower than food inflation. This has created an uptick in customer orders however in the latest Ocado retail trading statement there was no change in the sales/EBITDA (Ocado's chosen profitability metric) guidance for Ocado retail....
"There is no change to the guidance issued on 29 February with the Ocado Group FY23 results."
Yes, if you took that metric you'd say that Ocado is worth 9 x as much as Lloyd's bank. The reality is that Ocado is around 1/8th of the market value of Lloyd's Bank.
In general in Europe and in the US listed shares are set in bigger denominations than in the UK. This has no bearing on the companies value.