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Amazon primes Morrisons but hurts Ocado with UK expansion
Morrisons jumps but Ocado dives after supermarket strikes distribution deal with Amazon. FTSE recovers from early fall.
Morrison (MRW) shares jumped nearly 6% after the country’s fourth largest supermarket sealed a distribution deal with Amazon (AMZN.O), the US e-commerce giant.
The alliance marks an expansion of Amazon’s ‘Pantry’ service which it launched in the UK last year. It will give its Prime Now and Pantry customers access to the food products in Morrisons’ stores.
Morrisons’ chief executive David Potts said it was a ‘compelling’ partnership. ‘This is a low risk and capital light wholesale supply arrangement that demonstrates the opportunity we have to become a broader business.’
Morrisons’ shares gained 11p to 196.6p, making them one of the top ‘mid cap’ risers on the FTSE 250 index. They have risen a third during the bounce back in supermarket shares since the start of the year.
The news hurt Ocado (OCDO), the grocery distribution group behind morrisons.com, the online service launched by the supermarket last year. Its shares dived nearly 8%, or 22p, to 260p despite Morrisons announcing an agreement to expand the service.
Jonathan Buxton, partner at Cavendish Corporate Finance, said the sliding share price showed the 'significant concern at how the home-grown online grocer will be able to compete with the might of Amazon.'
Fears that Amazon’s expansion would intensify competition among retailers move hurt rivals. Tesco (TSCO) slid 2% or 3.75p at 179p, as it denied weekend reports that it was preparing a further round of big job cuts. Its shares have risen nearly 20% since 1 January.
Sainsburys (SBRY) traded lower before moving to add 1.6p at 251.8p.
Stock markets over came early pressure following the failure of G20 leaders in Shanghai to announce measures to boost the global economy.
The FTSE 100 shed 58 points or nearly 1% in the morning but reversed this to close a point up at 6,097.
Financial stocks bore the brunt of investors’ worries with London Stock Exchange (LSE) shedding 4.9% to £26.78, losing some of the gains after last week’s announcement of merger talks with Deutsche Borse.
HSBC Holdings (HSBA) dropped nearly 1.6% to 460p as analysts at Bernstein cut their rating to ‘underperform’ and trimmed their price target following last week's annual results.
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