What's going on?
Shares of Ocado – the UK online grocery retailer worth $12 billion – rose by 9% on Tuesday, despite announcing that its profit for the year would be lower than investors expected.
What does this mean?
In the last six months, Ocado grew its revenues by 12% more than the same time last year, which is what investors expected. However, its profit for the period was 14% lower, thanks in part to higher costs as the company upgrades its UK warehouses and software platforms. Ocado also said its annual profit from the year would be hit by even more investment costs and… staff bonuses! Apparently it’s not just investment bankers who can have their cake and eat it (by way of delicious payouts).
Why should I care?
For markets: Ocado continues its ascent.
Ocado’s stock is up by more than 250% in the last year. Investors waited a long time for the company to sell its automated ecommerce warehouse tech to traditional grocery retailers grappling with the digital age. To their relief, Ocado’s recently penned deals with American grocery giant Kroger, French behemoth Casino, Canada’s second-largest grocery chain and Sweden’s market leader – and its stock price has risen like a soufflé. As a result, workers are in line for almost $12 million in bonuses this year. Investors were willing to forgive the one-off payout (since it’s probably not going to happen again next year – unless the stock jumps another 250%), and bought up the stock as everything else was looking peachy.
The bigger picture: More grocery.com’s coming to websites near you.
Groceries are going digital and some companies are using Ocado’s technology to become more internet-friendly. They’re hoping to combat Amazon’s march into the industry via Whole Foods and Walmart’s ecommerce initiatives spearheaded by its acquisition of Jet.com – which now offers same-day delivery in some cities.