Andrea Felsted is a Bloomberg Gadfly columnist covering the consumer and retail industries. She previously worked at the Financial Times.

Grocer's Stock
Ocado shares have pared earlier losses amid speculation of an international deal
Source: Bloomberg data

The one delivery Ocado shareholders are waiting for still hasn't arrived.

After years of losses, the British online grocer has delivered two consecutive years of pretax profit. But it hasn't managed to strike a deal to run deliveries on behalf of a big international retailer. Or -- better still -- find a buyer for the whole company.

After letting expectations get out of hand, CEO Tim Steiner this week pushed out the prospect of any delivery agreement to the "medium term."

Delivering Profit
Ocado has swung into pretax profit over the past two years
Source: Bloomberg data

The delay is testing shareholders' patience: the stock is down 44 percent since mid-July, under-performing the FTSE All Share Food and Drug Retailers' index's 16 percent decline. There is no doubt Ocado needs to find another distribution deal: the company needs to diversify away from the highly competitive grocery market.

Its existing agreement to run supermarket Morrison's online operation has been very lucrative: the arrangement contributed 73.9 million pounds of revenue in the year to November, about 7 percent of the total, and about 14 million pounds of profit.

Then there is Ocado's agreement under which it sells upmarket Waitrose products through its own website. In the past it has been compared to a marriage. And like a marriage, there is always the risk of divorce.

Another partnership would demonstrate that Ocado isn't just a seller of prosciutto, prosecco and pet food to Britain's middle classes. Instead, the grocer would like to think of itself as tech company -- with a higher valuation. Ocado wants to be the Amazon Web Services of the grocery business, a provider of software and infrastructure to process food deliveries for anyone.

Ocado's Valuation
Grocer's enterprise value is still more than 1.4 times annual sales
Source: Bloomberg Intelligence

Ocado enterprise value has dwindled to 1.4 times sales. Back in November, the figure was 2.3 times, a level similar to Amazon's. Even after that decline, the figure is substantially more than the 0.56 median for Bloomberg Intelligence's European food retail peer group.

Premium Valuation
Ocado's EV/sales ratio is far higher than its grocer peers
Source: Bloomberg Intelligence

If Amazon wants to bring its own grocery delivery service to Europe, Ocado would be an obvious target for either a takeover or a distribution deal. Either would expand Amazon's fresh food offering exponentially

If that doesn't happen -- or Amazon ramps up its delivery services on its own -- that valuation may turn out to be long past its use-by date.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Andrea Felsted in London at

To contact the editor responsible for this story:
Edward Evans at