Ocado Plunges After Fire Shuts Automated Warehouse

Ocado Group Plc shares plunged after the U.K. online grocer said a fire at an automated warehouse will constrain its ability to meet customer demand, cutting sales growth.

The blaze at the facility in Andover, England, spread overnight into Wednesday, causing the roof to collapse and “substantial damage to the majority of the building and its contents,” the company said. Sales growth will be reduced until Ocado can increase capacity elsewhere, it added.

The shares fell as much as 8.8 percent, the most since October.

While Ocado said no one has been injured, the incident casts a cloud over the company’s growth outlook after a period of rapid expansion. Earlier this week, Ocado stood by its 2019 financial outlook, which includes a 10 percent to 15 percent increase in retail revenue, “assuming economic conditions remain broadly stable.”

The grocer has struck a series of licensing deals for its technology with the likes of Kroger Co. and Casino Guichard-Perrachon SA. Ocado said Tuesday that it’s talking to other retailers about potential deals, renewing speculation about a possible partnership with Marks & Spencer Group Plc.

The company said Wednesday that the fire is now under control, but it has suspended operations from the facility, preventing some fulfillment of orders since Tuesday morning. Ocado said it has comprehensive insurance for the property, stock and equipment, as well as for business-interruption losses.

It’s the latest of several fires that have struck online retail sites. E-commerce fashion seller Asos Plc has suffered from two blazes — one at a distribution center in Germany that damaged stock in 2017, the other at a warehouse in England in 2017 that caused the company to stop taking orders on its website.

The five-story, 240,000-square-foot Andover warehouse, which opened in 2016, provides about 10 percent of capacity for the food delivery business, handling more than 4,000 orders a day and using hundreds of robots to select groceries before they’re loaded onto trucks and delivered to homes across southern England.

Given that Ocado has been emphasizing expanding its technology licensing operation rather than its U.K. retail business, the share-price decline “seems a big overreaction,” Sanford C. Bernstein analysts led by Bruno Monteyne said in a note.

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