Analysis: Sir Stuart Rose's appointment is a coup for Ocado, but what does it mean?

Sir Stuart Rose has never been one to shy away from controversy and column inches simultaneously. His appointment as chairman of Ocado allows him to return to the limelight as a figurehead for one of the most hotly discussed businesses in retail.

He replaces former ITV and BBC chairman Lord Grade and is expected to be a slightly more communicative face of the company after what Ocado sceptic and Panmure Gordon analyst Philip Dorgan describes as “Pravda-like external communication”.

Rose’s appointment has been welcomed by the City as giving credence to a business which constantly has to convince analysts of both sustainability and ability to make profit long term.

Rose has had a turbulent relationship with the City – coming under consistent pressure over his dual role of chief executive and chairman – but remains both respected and trusted. Shore Capital analyst Clive Black said: “Sir Stuart is nothing but a man who enjoys a challenge and he is someone we hold in high regard. He is also great fun, colourful, opinionated and experienced and he has the potential to bring much needed esteem to Ocado.”

However, independent analyst Nick Bubb did add: “He will certainly bring ‘substantial retail experience and commercial acumen’, but given his belief that ‘retail is going through a fundamental shift into the digital world’ there will be some at Marks & Spencer who think he should have done more to modernise M&S’ antiquated online operating systems in his time there.”

But, as Black points out, “bad companies will always beat good management” suggesting that the move echoes that of former Tottenham Hotspur manager Harry Redknapp who moved to bottom of the Premier League Queen’s Park Rangers last year despite the fact the challenge to prevent relegation appears futile.

Rose’s appointment will not change analysts opinions of Ocado’s business model – which relies on large investments in infrastructure before reaping rewards for shareholders – however it may soften the critics. While the City’s view is far from the most crucial factor in Ocado’s future, with a heavy reliance on investment it is certainly important.

Dorgan says: “Sir Stuart Rose’s appointment as chairman of Ocado is a good move and should improve upon the company’s previous Pravda-like external communication. It should also add to the bid chatter that has surrounded the shares in recent months. That said, Ocado is gobbling up cash and is underperforming its multichannel competitors. We don’t see this changing.”

Suggestions Rose may lead Ocado into a merger or acquisition appear unlikely. While many have put Morrisons lack of online grocery operation forward as an obvious option, the difference in customer bases, as well as the considerable work being done at Morrisons’own Kiddicare to build an online grocery infrastructure, would appear to rule that out.

Rose may also have run the rule over Ocado before its IPO while at M&S, which is still without an online food offer, while the most likely option remains an acquisition by Amazon, a business which Ocado’s chief executive has much respect for.

Rose joins Ocado in a vitally important year for the etailer with two new warehouses opening over the next few months and its rivals continuing to improve their online operations significantly. Steiner told Retail Week last week that 2013 is a “crucially important year for us”.

Whether, as an investor in The Hut Group and chairman of fashion retailer Blue Inc, Rose will devote significant time to Ocado remains in question. However, his charisma and retail experience will doubtless get the column inches flowing once more while taking on old foes including Tesco, Sainsbury’s and Waitrose will test all of his retail nous.