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Ocado shares surge as online grocer inks £183mln deal with US retail giant Kroger

Ocado's chief executive, Tim Steiner, wants to transform the American retail landscape

Ocado delivery
Not just a UK-focused online grocer these days ... it's all about the technology

The transformation of Ocado PLC (LON:OCDO) from a UK online grocer to an international technology and fulfilment specialist continued apace with the unveiling of its fifth major partnership deal as it teamed up with the American giant Kroger Co (NYSE:KR).

Earlier this month, the company inked a similar agreement with Sweden's ICA, building on overseas deals with France's Group Casino and Sobeys of Canada.  

Remember too, Ocado counts Morrison Supermarkets PLC (LON:MRW) as one of its customers, having run the technology and delivery network for the Bradford headquartered supermarket chain's online operation since it launched in 2014.  

Financial commitment

Kroger demonstrated its commitment to the Anglo-American alliance by subscribing for 33.1mln Ocado shares worth £183mln, which would give it a 5% share of the UK business.

The pair are already working to find the first three sites to develop mechanised picking and packing centres scheduled to open this year with a total of 20 earmarked for roll-out over the next three years.

Kroger, which turned over US$122bn in 2017, has even said it will pay compensation if it fails to hit the capacity targets the two retailers have agreed.

Ambitious goal 

The ultimate goal, according to Ocado's chief executive Tim Steiner, is to transform the food retail industry in the US.

"[It] represents a huge opportunity to redefine the grocery experience of Kroger's customers and create value for the stakeholders of both Kroger and Ocado," he added.  

The impact on Ocado's bottom line next year is expected to be neutral.

Investors welcomed the news, with Ocado shares surging 61% higher to 889.2p, by far the London market's biggest gainer.

In pre-market trading in New York, Kroger shares were up 0.2% at US$25.

  -- Adds share prices --

 

Quick facts: Ocado Group PLC

Price: 2207 GBX

LSE:OCDO
Market: LSE
Market Cap: £16.51 billion
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