Ocado share price outperforms after Morrisons agreement

By: Tsveta van Son
Tsveta van Son
Tsveta van Son is part of Invezz’s journalist team. She has a BA degree in European Studies and a… read more.
on May 9, 2019
Updated: Mar 11, 2020

Shares in Ocado (LON:OCDO) have climbed into positive territory in today’s session as the company reached an agreement with Wm Morrison Supermarkets (LON:MRW) over the use of one of the online grocer’s customer fulfilment centres (CFC). The news came as the blue-chip supermarket updated investors on its first-quarter performance this morning.

As of 09:45 BST, Ocado’s share price had added 1.22 percent to 1,369.50p, outperforming the broader UK market, with the benchmark FTSE 100 index currently standing 0.42 percent lower at 7,240.34 points. The group’s shares have added nearly 150 percent to their value over the past year, as compared with about a 5.6-percent dip in the Footsie.

Morrisons agreement

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Ocado announced in a statement this morning that it had reached an agreement with Morrisons for a temporary suspension of the Morrisons.com capacity at the online grocer’s newest CFC in Erith, South-East London. Ocado explained that following the fire at its CFC in Andover earlier this year, it had been seeking additional capacity within its existing network of CFCs.

“Morrison’s agreement to temporarily suspend using Morrisons.com’s share of the capacity in CFC4 at Erith gives Ocado additional capacity to grow and thereby mitigate the impact of the Andover fire,” the company said in the statement, adding that Morrisons.com will return to using its share of capacity in Erith in February 2021.

The companies have also agreed to relax some exclusivity provisions, bringing Morrisons more in line with the terms agreed Ocado’s existing international clients.

Analysts on Ocado

The 14 analysts offering 12-month targets for the Ocado share price for the Financial Times have a median target of 950.00p on the shares, with a high estimate of 1,700.00p and a low estimate of 460.00p. As of May 3, the consensus forecast amongst 18 polled investment analysts covering the blue-chip grocer advises investors to hold their position in the company.

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