June 4, 2017 / 8:18 PM / 2 months ago

Online grocer Ocado finally lands overseas deal

2 Min Read

LONDON (Reuters) - British online supermarket Ocado (OCDO.L) has struck an overseas deal with an unnamed regional European retailer, a year and a half after missing a self-imposed deadline to secure one.

Partnerships with retailers overseas are seen by analysts as the key influence on Ocado's stock market valuation. However, the firm missed its target of securing a deal by the end of 2015 and has been testing investors' patience.

Ocado said on Sunday it will provide the partner, which it did not name, with software, know-how and support services required to create an online grocery business.

It said orders would initially be fulfilled from the partner's manually operated centralised warehouse.

The deal does give the partner the right to request in the future the installation of automated mechanical handling equipment in centralised warehouses, using Ocado technology, but the terms of that would have to be separately agreed.

Ocado said the partner will pay an up-front fee, together with ongoing fees that are based on the volume of products sold online. But it did not provide details of the magnitude of the fees or the length of the deal.

Ocado expects the agreement to be earnings neutral in the current and 2018 financial years, and increasingly accretive thereafter.

"Our discussions with other retailers across the globe are ongoing and we continue to expect to sign multiple deals in the medium term," said Chief Executive Tim Steiner.

In the Britain, Ocado sells products supplied by upmarket grocer Waitrose and also has its own distribution agreement with Morrisons (MRW.L), Britain's fourth largest supermarket.

Shares in Ocado have had a rollercoaster ride since listing at 180 pence in 2010. They closed Friday at 317.9 pence, valuing the business at 2 billion pounds.

Reporting by James Davey; Editing by Angus MacSwan

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