It has been another tumultuous few days on the rollercoaster ride that is the Ocado share price.

The market reacted buoyantly to the news that the grocer-cum-tech supplier had penned its latest international partnership – arguably its most impressive to date – with Japanese supermarket chain Aeon.

Despite operating in a country renowned for its future-shaping technology and robotics, the fact that Aeon has opted to join forces with a UK company is a testament to the expertise of Ocado.

“Concerns are mounting that the online grocer-cum-tech supplier has bitten off more than it can chew”

The Ocado share price rose from 1,202p when markets closed last Thursday to 1,330.5p by the end of Friday, the day the deal was announced, as the City digested the news of the lip-smacking tie-up.

But Ocado’s latest licensing deal, just like those previously inked with retailers such as US titan Kroger, Canadian supermarket chain Sobey’s, French operator Casino and Australian retailer Coles, will come at a princely sum.

The Aeon deal is expected to add £25m to Ocado’s operating costs next year alone, as it lays the foundations to open its first automated warehouse in Japan in 2023.

City caution

But with all-singing, all-dancing customer fulfilment centres now slated for five countries outside the UK, Ocado has an awful lot on its plate. And concerns are mounting that the online grocer-cum-tech supplier has bitten off more than it can chew.

Just 72 hours after details of the Aeon deal were revealed, Ocado launched a £500m bond issue to help fund its bulging basket of ambitious tech commitments.

Chief executive Tim Steiner says the cash injection will help his business “to deliver the future of online shopping today”. The market has certainly priced that future potential into Ocado’s meaty valuation, which is north of £8bn.

That lofty market cap took a hit on Monday in the wake of the bond issue. Following the fillip of Friday’s Aeon deal, Ocado’s cry for capital – coming less than two years after it tapped shareholders for £141m through a share placing – was much less palatable for investors. Indeed, Ocado was the FTSE 100’s biggest faller on the day, as shares fell 7.4% to 1227p. They have slipped further to 1,191p at the time of writing, though Ocado said there has been “strong investor demand” for the bonds and it upped the amount being raised to £600m.

“Ocado has left critics aplenty eating their words following a string of high-profile deals”

The City is right to display some caution. Ocado has signed up to build almost 40 automated warehouses – at a total cost of around £1.5bn. The payback of those depots will not be seen until they are up and running. The first two, in Paris and Toronto, are slated for the first half of next year, with others to be staggered across the next six years.

That timeframe will present challenges for Ocado – finance being primary among them.

“What surprises us is the need by Ocado for the capital,” Shore Capital head of research Clive Black says, pointing to its share placing last February and the £750m it is receiving from Marks & Spencer after selling a 50% stake in its online grocery business.

“What this suggests to us is that Ocado remains very ambitious but also highly cash consumptive,” Black adds. “The group simply does not fund its ambitions from anywhere near its operating cash flow after approaching 20 years of trading.”

Only human

But the question of cash is just one of those being asked of Ocado following its latest tie-up. There are increasing worries that it lacks the bandwidth to deliver on the promises to its international partners.

Finance boss Duncan Tatton-Brown says 400 new staff will be hired to work in its development centres, while more will follow in head office and in the countries where it has sealed partnerships.

Tatton-Brown insists, however, that Ocado has the capacity at senior management level to come good on its plans for the USA, Canada, Australia, France and Japan. That will surely be far easier said than done.

“Delivering on the five major deals Ocado has already committed to must be the top priority before any more partners are brought on board”

Ocado has left critics aplenty eating their words following a string of high-profile deals – and for that Steiner and his team deserve all the plaudits that come their way.

But they must ensure their eyes don’t become bigger than their stomachs. Delivering on the five major deals they have already committed to – and driving much-needed returns on those significant investments – must be the top priority before any more partners are brought on board.

For all its tech and robotic nous, Ocado’s leaders are only human. It may have to start working to those limitations to ensure it makes returns on all that cash.