Selling logistics systems propels Ocado into FTSE 100

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Ocado has been elevated to the FTSE 100 index in the wake of a series of deals to supply its logistics systems to other retailers that have driven its market capitalisation to more than £6 billion.

Ocado now has a market capitalisation greater than Marks & Spencer (£4.8 billion), despite the fact that sales at M&S are seven times those of Ocado (£10.6 billion against £1.5 billion).

In May 2017 Ocado’s share price was around 310p but over the past year it has risen to 880p driven by sales of warehouse systems to other retailers.

Earlier this month Ocado signed a deal with Kroger, the giant US retailer, to develop a series of automated warehouses. The two companies are currently working on three sites and this could grow to 20 sites. Kroger has also taken a five per cent stake in Ocado.

This is the latest in a series of deals to supply systems to other retailers. In the UK it has partnered with Morrisons, while international deals include Groupe Casino in France, Sobeys in Canada, and ICA Group in Sweden.

In the group’s annual results earlier this year, chief executive Tim Steiner emphasised the importance of these international deals. “We believe that taking advantage of these international opportunities now will make our virtuous cycle turn faster in the years ahead and we expect that to translate into higher returns on capital. We look forward to our future opportunities and challenges”.

Ocado will join the FTSE 100 on 18th June. The Index is reviewed quarterly to ensure that it continues to portray an accurate reflection of the market.

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