Expansion in store for Waitrose and Ocado

UPMARKET supermarket group Waitrose and Ocado, the internet grocer that sells Waitrose's groceries, are both set to hit the expansion trail belying the nervousness affecting much of the retail sector.

Waitrose, owned by the John Lewis department store group, is understood to be in exclusive talks to acquire the Eat sandwich bar and coffee chain for a mooted price of 100 million.

If a deal is agreed for Eat, which has some 100 outlets, it is set to make fortunes for the coffee chain's founders, Niall and Faith MacArthur, who own about 45 per cent of the shares.

Waitrose is thought to want to open Eat outlets in its supermarkets and sell its food in them.

It comes as Ocado, which is mulling a 1 billion stock market flotation later this year, said at the weekend that it might use some of the proceeds to create 2,200 jobs at a big new distribution centre.

Ocado – which has not made a profit since it was founded a decade ago – said it was considering five English sites for the new distribution centre, three in the West Midlands and two in the south of England. Talking of the jobs to be created, Ocado finance director Andrew Bracey said: "It is more people than in a car plant."

A final decision on where to locate the 100m, 25-acre project will be made in April.

It is believed Tim Steiner, one of the grocer's co-founders and its chief executive, has already inquired of Business Secretary Lord Mandelson as to whether the project might be eligible for grants.

The jobs created in the new centre – which will be like a giant supermarket where grocery orders are taken online and sent out to shoppers – are expected to be mainly lower-skilled positions.

Bracey said Ocado wanted to start the project by the end of this year and that it would take two years to complete.

Some City analysts have cast doubt on the 1bn flotation valuation of the loss-making online retailer. However, others believe Ocado should be making pre-tax profits within two years.

Last week, the company posted a 25 per cent jump in annual sales and beefed up its board ahead of the expected float. Sales for the year to 29 November surged to 427.3m, while operating losses narrowed by a third to 14.4m.

Ocado has drafted in David Grigson – a board veteran of Standard Life, Reuters, Emap and Carphone Warehouse – as the firm's senior independent director. Ruth Anderson, who spent 30 years at financial services firm KPMG, will chair Ocado's audit committee.

Average weekly orders for the firm – which is 29 per cent owned by the John Lewis pension fund – were up 26 per cent over the year to 71,000 items.