Ocado shares jump 44% on tie-up with big U.S. grocer

18 May, 2018, 15:05 | Author: Brooke Harris
  • Kroger paying $247M to license Ocado online home-delivery technology

Ocado Group PLC, which runs online delivery services and makes related software, said Thursday it's signed a partnership agreement with supermarket chain The Kroger Co.

United Kingdom retailer Ocado is to supply its Ocado Smart Platform technology to giant U.S. food retailer Kroger. As part of the agreement, Kroger will buy a 5% stake in the British company by purchasing more than 33.1 million new, ordinary shares at a value of GBP183 million ($247 million).

The two companies said they are in the process of looking for three locations in the U.S.in which to build automated warehouse facilities this year, with the goal of identifying up to 20 sites over the first three years of the deal.

The deal is not expected to affect Kroger's EPS guidance for 2018 or 2019.

Ocado is on the cusp of promotion to the FTSE 100 after it reached a potentially game-changing partnership with one of the world's biggest grocers.

"Ocado's unique, proprietary and industry-leading technology is set to transform the shopping experience of consumers around the world".

The shares jumped 62% to 894.6p on news of the tie-up with the largest supermarket chain in the US, Ocado's fourth global deal with a supermarket in the last six months.

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If the Ocado partnership gives Kroger the confidence to bring delivery in-house, "that will be disastrous for Instacart", said Neil Saunders, managing director of GlobalData Retail.

"Instacart is still the best partner for home delivery if one doesn't have dedicated e-commerce" operations, said Burt Flickinger, managing director of consultancy Strategic Resource Group.

Recently, Ocado has been working on licensing their technology solutions and had created partnerships with Morrisons, Grupe Casino and Sobeys in Canada.

Walmart Inc.'s mixed first quarter results had traders batting around stock between plus and minus and pre-market but, after opening higher, less impressed investors are winning out and sending shares down as much as 2.6 percent.

The retailer's efforts to create a "seamless digital experience" for customers would speed up as a result, he added.

It took a mega deal with a U.S. grocer for Ocado to prove that it's no basket case.

Ocado uses purpose-built robots, which are capable of picking a 50-item order in minutes, to man its automated warehouses, Paul Clark, Ocado Chief Technology Officer, wrote in the Harvard Business Review.

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