Jefferies: Ocado can save supermarkets from e-commerce

Ocado is the “partner of choice” for supermarkets looking to ride the wave of online shopping, a broker has claimed.

Jefferies said that many would need to rebuild their business models to continue delivering orders to customers.

It comes after a report showed that grocers stood to lose £246 million for every percentage point that e-commerce increased its market share.

They need a “partner with a heritage in grocery [and] automation,” Jefferies said. “In our view, Ocado remains a partner of choice in this regard.”

READ MORE: Ocado dodges Christmas ‘upset’ with turkey alarm

The investment bank argued that its partnership with Marks & Spencer, which began in September 2020, was “proof of the pudding”.

In the six months to 26 October, Ocado accounted for 27 per cent of the supermarket’s sales.

However, retail expert Max Hammond said many grocers favoured micro-fulfilment centres (MFCs), where robots pack shopping in the back room of a store.

By contrast, Ocado relies on a network of large warehouses measuring up to 600,000 sq. ft.

No MFCs exist in Britain, but US goliath Walmart trialled the technology at a shop in Salem, New Hampshire in 2019.

“The largest grocery retailers in the UK have started to think [of] this as a major strategy for their next year,” Hammond told this publication last month.

“This is going to be mainstream, certainly within the next ten years.”

Jefferies upgraded Ocado from “underperform” to “hold” and nearly doubled its target price to 1850p.

Shares opened today at 1644p, though this is well below Ocado’s pandemic peak of 2819p in September 2020.

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