On the money: Ocado still looking at more tie-ups in medium term
Ocado's Morrisons tie-up precludes it providing technical support to more than two UK grocers
Ocado chief executive Tim Steiner has said the UK online retailer is still looking to further develop licencing deals with larger retailers, although he emphasised there are no "imminent announcements" on any pending agreements.
In May last year, Ocado struck a deal with Morrisons that has seen it assist the UK's fourth-largest grocer in the development of its online business, launched last month.
The GBP200m deal sees Morrisons license Ocado's technological platform for 25 years. Morrisons also purchased an Ocado fullfilment centre in Dordon in a sale-and-leaseback agreement.
Investors warmly greeted what has been pegged as a "transformational" agreement. The news resulted in an immediate jump of 40% in Ocado's share price on the day the tie-up was announced and the company's valuation has remained on an upward trajectory. During 2013, Ocado shares rose almost 410% and, since 1 January, the group's share price has gained a further 13.6%.
Speaking to just-food today, Steiner said Ocado's current focus is on continuing to assist the roll out of morrisons.com. "We are focused on Morrisons... we want them to become an advocate [of Ocado's capabilities]," he said.
However, Steiner did reveal the company is looking at how it can develop further licensing relationships with other retailers to further monetise its technological capabilities. "We are building a platfrom to [help] multiple businesses globally... to get people online."
Any such tie-up is "most likely" to be with an overseas group if it is in the grocery retail sphere because the Morrisons deal requires Ocado to provide technical support to no more than two UK grocers, Steiner revealed. "In the medium-term we are likely to enter new markets... we talk to multiple [international] retailers on a daily basis."
Delivering its full-year results this morning, Ocado booked an increase in full-year net losses in spite of the Morrisons tie-up and its own sales - which rose ahead of the UK online grocery sector. Pre-tax net losses for the year to 1 December widened to GBP12.5m (US$20.4m), up from GBP600,000 a year earlier, Ocado revealed.
According to Conlumino retail consultant George Scott, the group's failure to deliver improved profitability - despite efforts to strengthen its branding and reach out to new customers - places a question mark over the future direction of the online retailer.
"For all the improvements in its brand, it is Ocado's operational strengths which may contain the key to its future. It is its specialist capabilities which initially enticed Waitrose and, more recently, Morrisons to pay for its services and Ocado's actions could be seen as an admission of an inability to generate a profitable standalone online-only grocery business.
"With rumours that French grocer, Carrefour, and Canadian chain, Loblaws, are now on the radar, many are now questioning what Ocado's future is: online grocer or fulfilment platform partner," he suggested.
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