Online-only grocer Ocado's share price has been on the rise after rumours, first reported in the Britain's Daily Telegraph, linking the online retailer to a deal with Marks & Spencer. However, analysis from research and brokerage firm Bernstein paints a less optimistic picture.
Bruno Monteyne, an analyst at Bernstein has suggested that if an agreement were to be reached, the service offered would likely to be an in-store-pick solution rather than a central fulfilment option.
His logic is based on the fact that M&S customers tend to favour smaller orders, which Monteyne suggests makes the central fulfilment option economically unviable.
The Bernstein analyst predicted that the in-store pick solution is less profitable to Ocado due to strong competition in the market from start-ups and other providers.
He speculated that a deal would only be likely to bring in £2 to £4 million (€2.38-€4.73 million) as compared to the £12 million (€14.2 million) Ocado has made from Morrisons in each of the previous three years.
While Ocado's share prices are performing well on the London Stock Exchange amid the rumours, Bernstein predict that Ocado will underperform with a price target of £1.90 (€2.24).
© 2017 European Supermarket Magazine – your source for the latest retail news. Article by Gavin Ryan. Click subscribe to sign up to ESM: The European Supermarket Magazine.