UK online retailer Ocado has reaffirmed its interest in expanding internationally and said the platform it has developed in the UK offers “very exciting” opportunities overseas.
Ocado, which is to team up with UK retailer Morrisons to launch its online service next year, has recently reportedly expressed aspirations to team up with partners overseas. In an interview with The Daily Telegraph in May, Ocado chairman Sir Stuart Rose said “possible international expansion” via joint ventures and licensing agreements were “all part of the future plans for the business”.
Speaking on Ocado’s first-half earnings call this morning (2 July), CEO Tim Steiner said there were “different opportunities” for the retailer at home and abroad.
“If you look at what we’re doing in the UK we have a wholly-owned business that has a supply relationship with Morrisons … we have another option where are are suppliers of technology to a totally unowned operation. So clearly, even in UK we have different models.
“There are some markets where you wouldn’t want to operate independently and others where it may be possible just to enter because there might be large wholesale route to market. We will have to take every market different and explore what are the options available to us and what are most interesting in terms of balance, risk and reward.”
He added the online grocery market in the UK is “the most advanced in the world”, but said a “piece of the [online] pie internationally is vital”.
He told analysts: “We’ve built a platform that works in its own right. Whether we take that into another country or partner it in a variety of different ways to structure that, remains to be seen, debated, decided and executed on in the future. The platform that we have developed offers very exciting business opportunities.”
Steiner suggested that in order to gain the opportunity internationally, Ocado will need to bring its “knowledge and investment”, together with “a scalable warehouse solution” into new markets.
After months of talks, a deal was announced in May that will see Morrisons launch an online food service with the use of Ocado’s distribution and technology. The deal, however, proved controversial due to the online specialist’s existing relationship with upmarket UK grocer Waitrose.
When the deal was announced, Steiner insisted it was “cast-iron clear” its new venture with Morrisons has no bearing on its existing partnership with Waitrose. He reiterated that to analysts today.
“There was a lot of noise around our relationship with Waitrose and a lot of it not beneficial and there was a lot of uncertainty on whether that will have a bearing on our relations. We remain explicitly clear. We are their largest customer and they are our largest supplier and we expect that relationship to remain as it is.”
Ocado this morning saw its share price fall as the group reported a first-half loss, despite increasing sales.
The grocer reported a loss before tax of GBP3.8m (US$5.8m) in the 24 weeks ended 19 May due to charges linked to the distribution deal signed with Morrisons and infrastructure costs related to the opening of new warehouses. The result compared to a profit of GBP200,000 last year.
CFO Duncan Tatton-Brown said Ocado recorded a “steady performance” in the first half of its financial year.
“We recorded strong sales growth, underpinned by a solid operational performance. We have opened substantial capacity and are well-positioned for further growth.”
Steiner added: “Our strategy remain unchanged … continue to develop the customer proposition, continue to grow customer numbers and spend, continue working on the optimisation of our operations, continue building capacity and continue the work on commercialisation of our IP.”
Ocado’s share price was down 4.10% to 299.40 pence at 12:40 BST.