Ocado Group shares jumped 12 per cent after Asda agreed to license its ecommerce software, handing the technology firm a much-needed boost after a difficult period with one of its key US partners.
The rise came after Asda revealed plans to roll out Ocado’s ecommerce technology across Asda stores and warehouses from early 2027, as it looks to improve its online grocery offer and close the gap with rivals including Tesco and Sainsbury’s.
The agreement will see Asda use Ocado’s software to support store picking, fulfilment and home delivery as part of a wider push to strengthen its digital operations.
The deal marks a positive moment for Ocado, whose shares were hit last year after US supermarket giant Kroger said it would close three underperforming warehouses built using the UK company’s technology.
Kroger later agreed to pay Ocado $350m in compensation, but the closures raised investor concerns over the long-term growth prospects of Ocado’s technology solutions arm.
The Asda partnership has therefore been seen as an important vote of confidence in Ocado’s platform, particularly as the supermarket works to rebuild momentum online following a challenging IT transition.
Asda has spent more than £1bn moving away from systems operated by former owner Walmart, a project that caused disruption to stock availability and weighed on sales.
The disruption also slowed efforts by executive chair Allan Leighton to revive the grocer’s performance after years of market share losses under private equity owner TDR Capital.
Ocado chief executive Tim Steiner told the Financial Times that the first priority would be moving Asda customers onto Ocado’s platform, which will support the retailer’s existing online grocery operation of more than 700,000 orders per week.
However, he said the partnership could eventually expand beyond software, with Asda potentially using Ocado’s automated warehouse technology in the future.
“They’re going to run the in-store fulfilment, the delivery and the front end of the platform,” Steiner said. “We hope in the future they can start to think about adding some automation.”
Analysts said the partnership could provide a meaningful uplift for Ocado.
Peel Hunt analyst James Lockyer estimated the deal could add around £30m to Ocado’s annual revenue and approximately £20m in earnings before interest, tax, depreciation and amortisation, based on Asda generating £3bn in ecommerce sales a year.
Ocado reported adjusted earnings before interest, tax, depreciation and amortisation of £178m last year on revenue of £1.36bn.
The Asda deal also adds another major UK grocery name to Ocado’s technology client base, with Morrisons already using its software to run online operations.
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