Ocado Plunges After Fire Shuts Automated Warehouse

(Bloomberg) -- One of Ocado Group Plc’s largest U.K. warehouses is expected to be completely destroyed by a fire, constraining the online grocer’s ability to meet customer demand and cutting sales growth.

The blaze began Tuesday morning in the 45-million pound ($58 million) automated facility in Andover, England, that manages as many as 70,000 orders a week. Although under control, it caused a collapsed roof and damaged all the robots and stock inside, firefighters said. Revenue growth will suffer until capacity can be increased elsewhere, according to the company.

“We expect the rest of the building to be lost in this fire,” said Neil Odin, Chief Officer at Hampshire Fire and Rescue Service. “It’s an incredibly difficult fire to get into because of the nature of the building.” It will take up to a week to ensure the site is safe to enter, he added.

While no one was injured, the incident casts a cloud over the company’s growth outlook after a period of rapid expansion. Earlier this week, Ocado affirmed its 2019 financial outlook, including a 10 percent to 15 percent increase in retail revenue, if economic conditions remain stable.

The shares fell as much as 9.1 percent, the most since October.

The warehouse was an example of technology that’s brought rivals including Kroger Co. and Casino Guichard-Perrachon SA to strike licensing deals with Ocado. The company said Tuesday that it’s talking to other retailers about potential deals, renewing speculation about a possible partnership with Marks & Spencer Group Plc.

The fire has prevented fulfillment of some orders since Tuesday morning, Ocado said Wednesday. The company said it has comprehensive insurance for the property, stock and equipment, as well as for business-interruption losses.

The fire started in a small, elevated part of the warehouse, and its cause remains unknown. Although sprinkler and alarm systems assisted the fire service in the fire’s early stages, it spread overnight. Around 200 firefighters have remained on site at a time, with services from surrounding counties having to assist. Ocado’s trucks were not affected and have been removed from the site.

It’s the latest of several fires that have struck online retail sites. E-commerce fashion seller Asos Plc has suffered from two blazes -- one at a distribution center in Germany that damaged stock in 2017, the other at a warehouse in England in 2017 that caused the company to stop taking orders on its website.

The five-story, 240,000-square-foot warehouse opened in 2016 and provides about 10 percent of capacity for the food delivery business. It typically handles more than 4,000 orders a day, using hundreds of robots to select groceries to be loaded on trucks and delivered to homes across southern England.

Ocado has been emphasizing expanding its technology licensing operation rather than its U.K. retail business, and the share-price decline “seems a big overreaction,” Sanford C. Bernstein analysts led by Bruno Monteyne said in a note.

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