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Seven minutes is a very long time in efficient markets, which appears to no longer describe the London stock market.
Shares in Ocado, a UK-listed grocery delivery and cash-burn specialist, are down 17 per cent at pixel in response to a warning that Canadian retailer Sobeys had scrapped their exclusivity deal and mothballed a nearly-built warehouse. The slump was immediate when Ocado’s warning hit the tape at 11:37:49 BST, even though the news was already out there.
Empire Reports, Sobeys’ parent company, posted fourth-quarter results on Canada NewsWire at 11:30:05 BST. All the news relating to its Ocado partnership is contained in a three-paragraph introductory preamble from Michael Medline, Empire’s president and CEO:
We continue to look at every opportunity to improve our overall profitability and each Voilà CFC takes time to become profitable; as a result, we will pause the opening of our fourth customer fulfillment centre in Vancouver, allowing us to focus on driving performance and volume in our three active CFCs. We are also working with our partner, Ocado, to decrease costs and provide increased flexibility to serve our customers more broadly, which includes ending our mutual exclusivity agreement.
Then, further down the page, Empire spells out its reasoning in much more detail than Ocado’s statement. Essentially, it’s that on current volumes Ocado’s kit is too expensive to make work effectively:
In fiscal 2021, the Company introduced its new e-commerce platform, Voilà, revolutionizing online grocery home delivery in Canada. Voilà is powered by industry-leading technology provided by Ocado through its automated CFCs. The Company intends to operate four CFCs across Canada, with supporting spokes and curbside pickup. This will enable the Company to serve approximately 75% of Canadian households, representing approximately 90% of Canadians’ projected e-commerce spend. To service Canadian households located outside of the core CFC service areas, the Company has Voilà curbside pickup, which services 98 stores in locations across Canada.
The Company has three active CFCs located in Toronto, Montreal and Calgary. In the quarter ended May 4, 2024, the Company decided to pause the opening of its fourth CFC in Vancouver, British Columbia to focus efforts on driving volume and performance in its three active CFCs. Construction of the external building for the fourth CFC has been substantially completed, with the internal work related to the grid build and robot commissioning not yet started. Once e-commerce penetration rates in Canada increase, the Company will be in a position to make a decision quickly on when it will proceed with the opening of its fourth CFC.
The Company has also taken actions to decrease costs and increase its flexibility to serve customers, including ending its mutual exclusivity agreement with Ocado subsequent to the year ended May 4, 2024, slightly before it was originally estimated to end. This will result in a one-time charge related to ending the exclusivity of $11.9 million in the first quarter of fiscal 2025.
For anyone paying attention, this should have been free money. But Ocado’s tick chart (below) shows no hint of a reaction either by price or volume between Empire’s report and its own. Ditto options.
Things had been looking up for the London market, with the successful float of Raspberry Pi raising hopes that City sentiment had turned. That a FTSE 100 stock* would fail to react to a screamingly obvious sell signal based on news given to overseas investors feels like significant evidence that it remains a finance backwater.
* FTSE Russell announced Ocado’s relegation to the mid-caps on June 5 but the change doesn’t take effect until June 24 so this is, technically, correct.
Read the full article here
