Ocado shares tumble on setback to Sobeys tie-up in Canada
Ocado saw its stock fall as much as 18% on Thursday afternoon after revealing that Sobeys has paused the launch of its new warehouse in Vancouver.
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Your support makes all the difference.Shares in online grocery group Ocado have slumped on news that Canadian supermarket giant Sobeys has paused the launch of its new warehouse in Vancouver.
Ocado saw its stock fall as much as 18% on Thursday afternoon after revealing the setback, adding that the companies have also agreed to “end terms related to their mutual exclusivity” agreement.
The firms first struck a partnership deal in early 2018 that would see Ocado build warehouses and power its online operations through the Ocado Smart Platform.
The Vancouver site was originally planned to launch in 2025.
Ocado and Sobeys have decided for now to focus their joint resources into driving order and sales volumes across the current network
Ocado said: “As the online channel accelerates, Ocado is supporting its partners to grow volumes and expand profitably, drawing on the experience of more than 20 years operating and growing an online grocery retailer in the UK, one of the world’s most competitive grocery markets.
“As part of this programme, Ocado and Sobeys have decided for now to focus their joint resources into driving order and sales volumes across the current network.”
Sobeys’s online shopping network so far comprises three warehouses across Toronto, Montreal and Calgary, as well as stock-picking operations across nearly 100 stores.
Ocado added that the launch date for Vancouver was not cancelled and will be under “regular review, and the site will be able to commission and scale quickly when required”.
It also looked to reassure that North American customers Kroger and Sobeys are still seeing robust demand for online shopping, saying they have announced strong growth in digital sales in their latest quarterly results.
Ocado said it remained on track with financial guidance for 2023-24 despite the move by Sobeys.
Analysts at Bernstein said the decision was “bad news” for Ocado.
“We think this is related to the weak rebound in online volumes across all markets,” they said.