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Seven minutes is a very long time in efficient markets, which no longer seems to describe the London stock market.
Shares in U.K.-listed food and fuel delivery specialist Ocado fell 17 percent in pixels in response to warnings that Canadian retailer Sobeys had scrapped an exclusivity deal and blocked a near-built warehouse. The slump came immediately when Ocado hit the tape at 11:37:49 BST, even though the news was already out.
Empire, the parent company of Sobeys, posted fourth quarter results on Canada NewsWire at 11:30:05 BST. All the news regarding the Ocado partnership is contained in a three-paragraph introductory preamble from Michael Medline, President and CEO of Empire:
We continue to look for every opportunity to improve our overall profitability and each Voilà CFC takes time to become profitable; as a result, we will suspend the opening of our fourth customer fulfillment center in Vancouver, allowing us to focus on increasing the performance and volume of our three active CFCs. We are also working with our partner, Ocado, to reduce costs and provide greater flexibility to serve our customers more broadly, which includes ending our mutual exclusivity agreement.
Then, further down the page, Empire explains its reasoning in much more detail than Ocado’s statement. Basically the point is that at current volumes the Ocado suite is too expensive to work effectively:
In fiscal 2021, the company unveiled its new e-commerce platform Voilà , revolutionizing online grocery home delivery in Canada. Voilà is powered by cutting-edge technology provided by Ocado through its automated CFCs. The company intends to operate four CFCs across Canada with support beams and curbside pickup. This will allow the company to serve approximately 75% of Canadian households, representing approximately 90% of Canadians’ projected e-commerce spending. To serve Canadian households located outside of CFC’s core service areas, the company has a Voilà curbside pickup service that serves 98 stores in locations across Canada.
The company has three active CFCs located in Toronto, Montreal and Calgary. In the quarter ending May 4, 2024, the company decided to suspend the opening of its fourth CFC in Vancouver, British Columbia to focus on increasing volume and performance at its three active CFCs. Construction of the outer building for the fourth CFC has essentially been completed, with internal work related to network construction and robot commissioning yet to begin. Once the rate of e-commerce expansion in Canada increases, the company will be able to quickly decide when to proceed with the opening of its fourth CFC.
The company has also taken steps to reduce costs and increase flexibility in customer service, including the end of its mutual exclusivity agreement with Ocado after the year ending May 4, 2024, slightly earlier than originally estimated to end. This will result in a one-time exclusivity termination fee of $11.9 million in the first quarter of fiscal 2025.
It should be free money for anyone paying attention. But Ocada’s tick chart (below) shows no sign of a reaction, either price or volume, between Empire’s report and its own. Same options.
Things were looking up in the London market with the successful breakout of the Raspberry Pi raising hopes that the mood in the City has turned. That the FTSE 100* has not responded to a glaringly obvious sell signal based on news provided to overseas investors feels like significant evidence that it remains in the financial backwater.
* FTSE Russell announced Ocada’s relegation to mid-tier on June 5, but the change doesn’t take effect until June 24, so it’s technically correct.