Ocado starts search for new chief as licensing setbacks weigh on shares

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Ocado CEO search and setbacks

Highlights

Ocado shares fell 4.3 percent to 173p on Monday, reaching a 13-year low and dropping below the 2011 IPO price of 180p.
Licensing setbacks, including a scaled-back Kroger partnership and the loss of 1,000 jobs, have pressured Ocado’s earnings and investor sentiment.
Ocado’s market capitalization dropped from over £20 billion during the pandemic to about £1.46 billion, reflecting reduced confidence in online grocery growth.

Succession plan unfolds amid market pressure

As reported by Financial Times, Ocado says it "continually" engages in long-term succession planning and regularly speaks with potential candidates as it searches for a successor to Steiner.

Sky News reported on Sunday that the London-listed group is preparing to appoint a replacement and that Niklas Heuveldop, chief executive of Ericsson subsidiary Vonage, is among the candidates. Steiner has led the business for 26 years after founding Ocado in 2000 with two former Goldman Sachs colleagues.

Ocado’s shares fall 4.3 per cent to 173p on Monday, leaving them below the company’s 2011 listing price of 180p. The decline puts the stock at its lowest level in 13 years.

Licensing model faces renewed scrutiny

Investor confidence in Ocado has been under strain as the company’s push to license its grocery delivery technology overseas has stumbled. Its automated facilities require heavy upfront investment and need to run close to capacity to generate returns, adding pressure when partners slow expansion.

A key setback comes from its landmark 2018 partnership with U.S. supermarket chain Kroger, which was scaled back last year. That reduction hurts earnings and forces Ocado to cut 1,000 jobs in a restructuring.

Ocado also has licensing agreements with Sobeys in Canada, Casino in France and Auchan in Poland, while its original retail business operates through a joint venture with Marks and Spencer. The company receives some support from a deal struck last month to license its ecommerce software to UK supermarket chain Asda.

The group’s valuation surged to more than 20 billion pounds during the Covid-19 pandemic as investors expected a lasting shift to online grocery shopping. Those expectations later faded, leaving Ocado’s market value back at about 1.46 billion pounds.

Our earlier coverage of the ongoing erosion of London’s equity market highlighted how capital is increasingly being funnelled into speculative, loss-making names while established UK businesses struggle to attract support and fair valuations. We noted that a shrinking IPO pipeline, take-private deals and declining household share ownership are reinforcing the squeeze on London-listed firms, increasing the risk that stronger companies exit the public market.

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