Ocado strikes 'transformational' deal with USA giant Kroger

London Stock Exchange

Online retail specialist Ocado has signed its fourth worldwide deal, with the announcement that it will be supplying its Ocado Smart Platform technology to Kroger in the US.

Shares in online grocer Ocado surged nearly 50% to 790p, adding £1.5bn to its stock market value, taking it above £5bn for the first time, as investors cheered the news.

Kroger and Ocado are working to choose the first three sites for 2018 for development of automated warehouse facilities in the U.S. Ocado said up to a total of 20 facilities will be identified for development over the first three years of the agreement.

Kroger has almost 2,800 shops across 35 U.S. states and annual sales of $122bn in 2017.

Ocado CEO Tim Steiner is confident that this deal, and others like it, will "transform the shopping experience of consumers around the world".

"As we work through the terms of the services agreement with Kroger in the coming months, we will be preparing the business for a transformative relationship which will reshape the food retailing industry in the United States in the years to come".

FTSE soars on Ocado US deal news
GETTYFTSE soars on Ocado US deal news

Our partnership with Ocado will speed up our efforts to redefine the food and grocery customer experience - creating value for customers and shareholders alike. Ocado will also allow Kroger to use its online shopping and logistics technology.

Earlier this month, it inked a deal to build Swedish supermarket ICA's online grocery business and it also has finalised deals with Canadian grocery Sobey's and french supermarket company Groupe Casino.

"We have little doubt that an attractive return on invested capital will be achieved on the huge amount of capital set to be invested across Ocado's global Ocado Smart Platform partnerships and, with a significant long-term earnings runway now in place, retain our positive stance".

"This is clearly a transformative deal for Ocado, and one that is on a completely different scale to those announced in the past", said Numis analyst Andrew Wade.

There are losers in the rapid ascent of the share price - the short sellers betting that Ocado would stumble and fall with the onslaught of the big beasts of online retail, led by Amazon. "That position now looks like a badly busted flush".

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