Ocado shares hit after fire at Erith warehouse

Ocado shares were hit on Monday after a fire at its warehouse in Erith, south-east London, following a collision between three robots.

Hundreds of staff had to be evacuated from the warehouse on Friday night but no one was injured. Ocado said there would be "disruption to operations" but that it was "working to restore normal service as soon as possible".

"We expect the facility to begin operating within the coming week and thank customers whose orders are affected for their patience," the company said. "We would like to also thank the London Fire Brigade and all the other emergency services for their hard work and professionalism in dealing with this incident."

This is the second fire at an Ocado warehouse, after its Andover facility burned down in 2019 due to an electrical fault. However, Ocado said that in this instance the damage was limited to less than 1% of its grid.

The Erith warehouse serves Ocado Retail, which is a joint venture between Ocado and Marks & Spencer.

The shares were knocked lower by the news and by 0900 BST, were trading down 2.4% at 1,762p.

Neil Wilson, chief market analyst at Markets.com, said: "There is the immediate operational impact at Erith with orders being cancelled following the blaze, which was caused by a three-robot crash. There is reputational risk from cancelling swathes of orders - small I’d say - but nonetheless to be considered.

"But the main thing investors are concerned about is the safety of the technology - will this be repeated? It is only two years since the Andover facility burned down. Will this impact on future deals with international partners?"

Broker Numis said: "This has resulted in some cancellations to orders, primarily resulting from the disruption which is expected to see the facility (which has capacity for circa 150k orders per week) reopening later this week.

"Assuming a week of disruption at Erith, this could weigh on Ocado Retail’s 3Q orders by a low-single digit percentage and therefore unlikely to impact FY21 forecasts materially. While the fire and the disruption caused highlights a trade-off from a fully automated customer fulfilment centre, it also shows the progress in reducing the operational risk in the newer generation CFCs."