SoftBank-backed warehouse robotics group doubles down on business debut

Rising retail wages will fuel a “hyper growth” in demand for warehouse robotics, predicted the SoftBank-backed company that is automating all of Walmart’s U.S. fulfillment centers, its valuation more than doubling to $10 billion. dollars on the first day of trading.

Symbotic, which uses artificial intelligence and fleets of wheeled devices to help retailers store packages and assemble pallets in their warehouses, raised $725 million through a merger with an acquisition company in special purpose affiliated with SoftBank.

Shares of Symbotic jumped 120% to close at $20.07 on Wednesday, giving it a net worth of just over $10 billion.

SoftBank, the Japanese investment group, invested $200 million to raise its stake to 5% while Walmart, Symbotic’s biggest client, injected $150 million and now owns 11% of the company.

Rick Cohen, chairman of Symbotic, still owns 77% of the company’s stock. Cohen, whose net worth was estimated by Forbes at $6 billion last month, built Symbotic to automate the warehouses of C&S Wholesale Grocers, the chain his grandfather founded in 1918.

Michael Loparco, chief executive of Symbotic, told the Financial Times that rising hourly labor costs and labor shortages have made the warehouse automation market “red hot”.

Symbotic’s system has allowed retailers to eliminate “backbreaking” warehouse jobs and deal with high turnover in their workforce, he said, although he added that it also created more qualified positions.

The company serves five customers, including Walmart, Albertsons and C&S, and reports an $11.1 billion backlog of committed sales after Walmart agreed in May to install Symbotic systems in its 42 fulfillment centers. Symbotic has posted nearly $400 million in revenue and $122 million in net losses over the past four quarters.

The company’s listing comes as historically high inflation and unpredictable supply chains pressure U.S. retailers to find cost savings and efficiencies in their distribution networks. Stocks of retailers including Target and Walmart have fallen sharply in recent weeks after reporting that inflation and high inventories would squeeze their profit margins.

Symbotic says its systems, which typically cost $50 million to install, can help customer bottom lines by saving 30 to 60 percent of warehouse space and reducing operating and transportation costs. The company estimates that the system can save the typical customer $10 million per warehouse.

Changing consumer demand was also driving the warehouse automation market, Loparco noted.

Consumers expect product “when they want it, where they want it, and they’ve grown accustomed to getting it where they need it,” he said. “So consumer demand is forcing retailers to look for ways to more efficiently get consumer goods – products – into the hands of their customers.”

Symbotic faces competition from automation companies such as Amazon Robotics and AutoStore, but Loparco said its rivals largely offer services “further downstream” in the micro-execution supply chain, while Symbotic focuses on warehouses. The concentration allows the company to tap into “unexplored value” in a market it estimates at more than $350 billion, he said.

About 95% of warehouses in the United States and Europe lack end-to-end automation, Loparco said. But analysts expect continued growth in demand, with research and advisory firm Gartner predicting that three-quarters of large companies will implement “some form of intelligent intralogistics robots” in warehouses by 2026.

The deal to take Symbotic public is the first Spac merger SoftBank has completed.

Garland K. Long