The stock is up 13% as the Group announces its partnership with Canada's second-largest food retailer.
Companies: Ocado Group PLC
Ocado (LON: OCDO) shares have jumped today as the Group announces its second international deal to supply its Ocado Smart Platform (OSP) technology.
Today's update details its OSP deal is with Sobey's, Canada's second-largest food retailer with over 1,500 stores and Revenues of C$23.8bn (£13.7bn) in 2017.
Ocado will help Sobey's build its own version of the Group's highly-successful grocery delivery platform, including a website, mobile app, an automated warehouse and a driver delivery management system.
Today's announcement comes less than two months since Ocado confirmed its first international OSP deal. This was with French company Groupe Casino, the name behind French supermarkets Monoprix and Spar.
The project with Sobey's is expected to take around two years and will focus initially on the Toronto area, with the potential to build more warehouses in other Canadian cities in the future.
As with the Groupe Casino deal, Sobey's will pay undisclosed upfront frees at certain intervals of development as well as other ongoing fees.
Whilst the deal is expected to create "long-term value for the business" it will be earnings neutral in the current financial year and will cost Ocado approx. £15m in capex.
The news pleased investors this morning, with shares jumping 13% in early trading/
Luke Jensen, CEO of Ocado Solutions, added:
"Channel shift to online in North America is gaining pace as consumers increasingly seek the benefits of grocery shopping from the comforts of their own homes, and as retailers attempt to offer services to meet this growing customer trend. We are pleased to be partnering with innovative and forward-looking retailers such as Sobeys. Soon Sobeys, along with Ocado, Morrisons and Groupe Casino will be powered by Ocado Smart Platform, sharing a common goal of harnessing the best technology for grocery ecommerce to win in their markets."
The signing of international deals for the Group's OSP is said to be a key test of Ocado's business model. Group CEO Tim Steiner said in February 2015 an overseas deal would be struck "by the end of the year", while investors had to patiently wait more than two years for an announcement of an overseas partnership which was flagged in June 2017.
The market is clearly baking in a lot of potential growth for OCDO, who trade on a forecast PE multiple of 229x. Revenues are forecast to grow c. 33% in the two years to FY18.
