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The Guardian - UK
The Guardian - UK
Julia Kollewe

Ocado shares soar as it signs deal with South Korean retailer

A robotic picking machine at the Ocado warehouse in Erith, London
A robotic picking machine at the Ocado warehouse in Erith, London. Photograph: Paul Childs/Reuters

The online grocer Ocado has struck a deal to build robotic warehouses for a South Korean retailer, sending its share price rocketing.

Under the deal with Lotte Shopping, Ocado will also provide technology for online grocery orders from Lotte’s stores. Financial details of the partnership were not disclosed.

It provides a much-needed boost to Ocado at a time when grocery sales are slowing, and its shares jumped 33% to 632p on the news.

After enjoying booming sales during the Covid-19 pandemic, the company has been hit by a shift away from home deliveries as lockdowns ended, coupled with the worsening cost of living crisis.

Ocado warned of an annual sales decline in September, saying customers were trading down to value products and buying less overall, amid the pressure of soaring food and energy bills. The retailer has expanded its cheaper own-label range and run more promotions to draw in more shoppers. It is also taking a hit from higher costs, mainly from energy and dry ice, which will weigh on profits in the fourth quarter.

Lotte Shopping is the retail arm of Lotte Group, one of South Korea’s biggest business conglomerates. It runs more than 1,000 department stores, hypermarkets and supermarkets in the country with an annual revenue of 15.6tn South Korean won (£9.5bn).

Ocado will build a network of automated warehouses for the company, with six planned by 2028, where robots pick food and other items for delivery to shoppers. It also has partnerships with other companies including Kroger in the US and Groupe Casino in France.

For the first time, warehouses will be multistorey, featuring Ocado’s grids on each level with next-generation, lighter robots under its new “Re:imagined” technology. Robots crisscross a giant chessboard-style grid layout to sort orders.

Luke Jensen, who runs Ocado Solutions, its technology arm, said: “South Korea is among the most developed and dynamic markets for grocery e-commerce in the world. Lotte is a powerhouse grocery player in the market.

“This partnership also gives Ocado another important foothold in Asia-Pacific as we target further growth across the region.”

Analysts at Numis said: “For us, beyond the deal itself, the signing of a first new partner on to the Re:imagined platform is a key development. It suggests that despite the solution not being live in a warehouse, management are sufficiently able to demonstrate its capabilities to attract partners.”

Two of Ocado’s automated warehouses have been destroyed or damaged by fire in the past, with the latest blaze caused by a robot collision at Erith in south-east London last year, but the company has expressed confidence that its latest robots are safer.

Chris Beckett, the head of equity research at Quilter Cheviot, said: Ocado’s tie-up with Lotte is great news for the business and gives a vote of confidence in its technology following what has been a fairly disastrous year for the stock. Lotte is a major player in the South Korean market and this deal has the potential to have some sort of halo effect across the rest of Asia, showcasing Ocado’s technological capabilities to a very large market.”

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