Ocado Fuels Speculation About Marks & Spencer Link

(Bloomberg) -- Ocado Group Plc said it is talking to retailers about potential deals, renewing speculation about a possible partnership with Marks & Spencer Group Plc.

The U.K. online grocer signed a number of technology licensing agreements in 2018, including a mammoth partnership with Kroger Co. in which the U.S. supermarket chain agreed to buy a stake. Talk that Ocado might sign up M&S has circled over the past week amid U.K. press reports.

Ocado Fuels Speculation About Marks & Spencer Link

“It is our business to talk to retailers, but we never comment on who we are talking to,” Chief Executive Officer Tim Steiner said on a media call. When an existing partnership with John Lewis Partnership’s Waitrose expires in September 2020, “we’ll still be selling 50,000-plus lines to our customers.”

“They may be Waitrose, they may not be -- we’ll have to wait and see,” he added.

Ocado shares initially fell as much as 3.8 percent to 955 pence in London trading Tuesday morning, then reversed to trade up as much as 3 percent to 1,022 pence. They were up 0.4 percent to 996.40 pence at 9:59 a.m. The stock was the best performer on Europe’s Stoxx 600 and FTSE 100 in 2018, with a 99 percent gain.

Ocado Fuels Speculation About Marks & Spencer Link

Ocado stood by its 2019 financial outlook, “assuming economic conditions remain broadly stable.” Preparing for a potential no-deal Brexit in late March, the company has boosted inventories of mechanical spare parts to mitigate the risk of delays at the borders. It said it couldn’t stockpile food because it has no extra warehouse space and the food wouldn’t remain fresh.

“If any of the routes into the U.K. grind to a halt due to checking on the European side, that will obviously have an impact on every retailer,” Steiner said. “If there is an issue and things like food are prioritized but not mechanical parts, we don’t want to be in a situation where we can buy the food but we can’t run a conveyor because we are missing a component or it’s broken.”

Full-year retail revenue climbed 12 percent to 1.47 billion pounds ($1.92 billion) and total order volumes increased 12.1 percent. Earnings before interest, taxes, depreciation and amortization were 59.5 million pounds.

New U.K. reporting requirements affected the results, reducing revenue by an estimated 15.2 million pounds and Ebitda by an estimated 14.4 million pounds. A company-supplied consensus of analysts’ estimates called for Ebitda of 58 million to 61 million pounds when taking the reporting changes into account, or 73 million pounds without the changes.

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