Ocado shares jump amid tie-up announcement with Canada's Sobeys

Ocado shares jump amid tie-up announcement with Canada's Sobeys

Canada's second largest food retailer Sobeys Inc has signed a deal to use the e-commerce platform of Ocado to expand its online business, sending shares in the British group up 10 per cent on its latest worldwide tie-up.

Ocado said the partnership will involve building an online grocery business in Canada, where Sobeys operates more than 1,500 stores under brands including Safeway, IGA and and Thrifty Foods.

The FTSE 250 company announced today that it was "delighted" to be working with one of the leading retailers of Canada.

Luke Jensen, chief executive of Ocado Solutions, confirmed the development: "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".

RBC rates Ocado as "Sector Perform", Its valuation assumes Ocado could sign six worldwide deals, RBC said. "Sobeys is a highly successful and much admired Canadian business and we are proud that they have chosen Ocado Solutions to partner with to build their online grocery business".

GETTYOcado has reached an agreement with Canadian retailer Sobeys to develop an online grocery platform
GETTYOcado has reached an agreement with Canadian retailer Sobeys to develop an online grocery platform

Ocado said it expects the deal to be earnings neutral in the financial year ending in November and sees additional capital expenditure of 15 million pounds ($20.8-million), with more spending expected in future years.

French supermarket Groupe Casino signed a deal with Ocado previous year to use its grocery e-commerce platform to develop its online business.

However, it said that profitability of its Ocado Solutions business is "likely to grow" from full-year 2019 onward thanking to rising fees from its existing deals, and "as other deals are signed".

"We are very excited to bring this best-in-the-world grocery e-commerce experience to Canadian customers".