Ocado PLC (LON:OCDO) shares jumped higher in early deals as short-sellers got burnt after the online grocer finally unveiled a long awaited international deal for its online shopping platform, although there was a lack of detail about the partner
In a statement this morning, the FTSE 250 firm said it had signed an agreement with a “regional European retailer to use Ocado Smart Platform (OSP).”
The group added: “The retailer wishes to remain anonymous until it launches its online business in order to retain competitive advantage.”
WATCH: Ocado Group PLC's European deal likely to be first of many says ETX's Neil Wilson
In late morning trading trading, Ocado shares were up 4%, or 12.4p higher to 328.4p, off earlier highs.
Independent retail analyst Nick Bubb commented: “For one of the most shorted stocks in the market, the Ocado share price has had a remarkable run in recent weeks (from 240p to 317p), shrugging off denials by M&S of a deal with them, and it looks as if somebody knew something else, given the news today that Ocado has signed its first Overseas licensing tie-up.
“But a modest software deal with ‘a regional European retailer’ (without any central warehousing) is hardly the big deal that the share price run has been discounting, so there may well be some profit-taking once the City has digested the deal and the shorts regain their nerve.”
Ocado said it “expects the arrangement to be earnings and cash neutral"
Ocado said it will provide this partner with its “full software platform, know-how and support services required to create an efficient and intelligent online grocery business, with orders initially fulfilled from their manually operated centralised warehouse.”
The online grocer said the new partner will pay an up-front fee for access to OSP, together with ongoing fees that are based on the volume of products sold online.
Ocado said it “expects the arrangement to be earnings and cash neutral in the current and 2018 financial years, and increasingly accretive thereafter.”
Tim Steiner, Ocado’s CEO, said: "We are delighted that our partner has decided to adopt OSP for its online operations. This is an exciting step in the evolution of our business and in the delivery of our strategy.
He added: “Our discussions with other retailers across the globe are ongoing and we continue to expect to sign multiple deals in the medium term."
In a note to clients, analysts at Barclays Capital said: "This is clearly good news, but with the information we have it falls some way short of being a full endorsement of the Ocado concept."
March trading update was steady but unspectacular
Back in March, Ocado issued a trading statement showing its gross retail sales grew by 13.1% in its first quarter, unchanged on the same stage in the previous year, as average order volumes rose but order amount fell reflecting pricing pressures.
In the 13 weeks to February 26, the FTSE 250-listed firm saw its gross retail sales rise to £352.4mln, up from £311.6mln in 2015, with group gross sales up 13.3% to £384.7mln.
READ: Online grocer Ocado sees first quarter sales hold steady, but highlights pricing pressures
In a note to clients at the time, analysts at Shore Capital called the trading update "unspectacular".
They said: "All in all, therefore, we see this as good and steady sales growth from Ocado but not progressive, we doubt material adjustments to market consensus today (14th March 2017) from previously downgraded figures (again) whilst the elusive international queue of potential partners must be just getting longer and longer with unending patience and understanding evident on behalf of the gathering crowd."
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