Ocado Cautious on U.K. Retail Growth Despite Online Food Demand

Ocado Group Plc is counting on three new automated warehouses in the U.K. to improve its ability to meet demand for online grocery shopping that’s thriving during the pandemic.

The company’s retail revenue jumped by 35% in 2020, as the U.K. delivery arm that’s jointly owned with Marks & Spencer Group Plc gained popularity among Covid-wary customers favoring e-commerce over supermarkets.

Ocado has not always been able to meet demand for deliveries, however, because its automated warehouses take time and considerable investment to build. During the first lockdown in March it had to temporarily take down its website as it was deluged with orders. On Tuesday, the company said retail sales growth this year will depend on additional capacity and the length of Covid restrictions.

The shares, which gained almost 80% in 2020, fell as much as 5.2% in London.

Ocado is more bullish on prospects for its technology licensing arm, saying invoiced fees will grow about 30% in 2021. The business has formed partnerships with grocers including Kroger Co. in the U.S. and Japan’s Aeon Co., and has opened automatic warehouses for Casino Guichard-Perrachon SA in Paris and Sobeys Inc. in Toronto.

Overall, Ocado posted earnings of more than 73 million pounds ($100 million) for 2020, just ahead of its upgraded forecast.

Ocado plans about 700 million pounds of capital expenditure this year as it expands the automated warehouse business. The company’s growth could be impeded, however, if patent infringement action brought in the U.S. and U.K. by AutoStore Technology AS succeeds.

The Norwegian maker of automated storage retrieval systems claims Ocado has infringed its intellectual property and patents and is seeking to block its expansion in the U.K. and U.S. Ocado denies this and has accused AutoStore of fraudulently obtaining U.S. patents for its robotic system.

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