Ocado to raise £575 million to help scale up its tech division

Ocado, the leading retail and grocery technology firm based in Hatfield, UK, is reportedly planning to raise over £575 million from investors in order to expand its technology arm, which allows foreign retailers to sell groceries online.

According to reports, the firm has also secured a £300 million credit facility with the conglomerate of global banks.

The company stated that it is planning to utilize the capital to support innovation and help its customers, including French grocer, Casino, and US-based supermarket chain, Kroger, to hasten the shift towards online shopping.

The company’s plan was set forth late on Monday after Fitch downgraded the online delivery specialist’s rating from stable to negative. The credit rating agency also mentioned that the company will take more time than expected to build advanced warehouses for foreign retailers to achieve profitability.

Fitch cited in a note that its rating is a reflection of the initial investments, growth in scale, and execution risks associated with the evolution of 40 of the company’s global distribution centers over the forthcoming four years.

It added that short-term profit margins might suffer temporarily due to increased  living expenses, higher marketing, labor, and energy costs and reduced customer per order spending.

During the past two and a half years, the company’s advanced warehouses have had difficulty keeping up with the rapidly transforming retail landscape in the UK. On the other hand, major supermarkets such as Morrison’s, Tesco, Sainsbury’s, and Waitrose have fast stepped-up deliveries through companies such as Deliveroo or via their stores.

Back in May, Ocado had alerted that its sales growth would be less than 50% of the rate it had expected to obtain as the return to office work, dining out, and cost-of-living crisis would impact trade.

Compared with the 10% expected, the online grocer, who is partly owned by M&S, now anticipates growth of less than 5% for the year to the end of November.

The forecast is followed by an 8% drop in sales in the two months to 25 April in comparison with a 5.7% decrease in the three months prior.

Source credit: https://www.theguardian.com/business/2022/jun/20/ocado-aims-to-raise-575m-from-investors-to-fund-tech-arm-expansion

Puja More

Puja More holds a graduate degree in Computer Science from the University of Pune. Nurturing her passion of playing with words however, Puja undertook content writing as a career path and boasts of rich experience in content production, copywriting, and digital marketing. Presently, Puja writes articles on technology, business, and healthcare for playthemusic.biz and a few similar portals.