Ocado enters South Korea with grocery tie-up
Ocado is set to join forces with Lotte Shopping, which operates more than 1,000 stores across the country and earns about £9.5 billion annually.
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Online grocery giant Ocado has enjoyed a surge in its share price after revealing it has partnered with one of South Korea’s largest supermarkets.
Ocado is set to join forces with Lotte Shopping, which operates more than 1,000 stores across the country – including departments stores and supermarkets – and earns about £9.5 billion annually.
The agreement will see the development of a network of customer fulfilment centres, which will cover multiple regions in South Korea and cater to a range of grocery demands.
Shares in Ocado soared by more than a third on Tuesday morning as investors cashed in on the group’s expansion.
The FTSE 100-listed company said that it is targeting further growth across the Asia Pacific region.
But Ocado has seen a slump in its share price over the past year, with around two thirds wiped off the value of its stocks.
The group has pumped more money into the expansion of its technology operations this year, widening its losses as a result.
It has also suffered tumbling sales at Ocado Retail, its joint venture with Marks & Spencer.
But Ocado said that the deal with Lotte – which brings the firm’s total number of partnerships to 12, across 10 countries – will create “significant long-term value” to the business.
The big question is whether Ocado’s partnerships can turn it into a profitable business that returns cash to shareholders
Tim Steiner, Ocado’s chief executive, said: “This partnership brings the Ocado Smart Platform, the most advanced technology for serving online grocery, to one of the most mature e-commerce markets in the world.
“I’m delighted to welcome Lotte to the innovative group of retailers developing their online operations with Ocado.”
Lotte Shopping’s parent company, Lotte Group, is the fifth largest multi-industry firm in South Korea – with businesses covering retail, food, hotels and chemicals, and with a total revenue of £45 billion.
The first customer fulfilment centre is due to open in 2025, with six planned by 2028.
Victoria Scholar, head of investment at Interactive Investor, said: “This is a smart opportunistic move from Ocado that will allow the business to gain a foothold in an important growing economy.
“However, investors in Ocado have had a tough time with the stock which is the worst performing company on the FTSE 100 over a one-year period, shedding nearly 70% even after today’s bounce.
“The share price decline reflects its lack of growth, dividend and profitability which have seen investors shift away from the stock.
“The big question is whether Ocado’s partnerships can turn it into a profitable business that returns cash to shareholders.
“This morning’s positive share price reaction will come as a welcome reprieve for its loyal remaining investors.”