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Ocado signs terms of deal struck with US supermarket chain Kroger

Ocado expects the earnings impact of the Kroger deal to be neutral in the fiscal year 2018

Ocado
Kroger will use Ocado’s technology that automates online grocery orders

UK online grocer Ocado Group PLC (LON:OCDO) and US supermarket chain Kroger Co (NYSE:KR) have signed service and operational terms for the deal they agreed in May.

Under the deal, Kroger will use Ocado’s technology that automates online grocery orders and the British firm will construct robotically operated warehouses in the US. The US supermarket chain will also take a 5% stake in Ocado.

Ocado said the terms of the deal include how Kroger will order warehouses, or what it calls customer fulfilment centres (CFCs), and the basis on which it will develop and operate the sites in the US.

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

Kroger is expected to order 20 CFCs over the first three years of the agreement. The first three CFCs are expected to be ordered by the end of 2018 at an estimated net outflow of £90mln to Ocado.

Ocado will install and maintain mechanical handling equipment for the CFCs, which the company aims to go live within about two years of each order being placed.

Ocado expects the earnings impact of the deal to be neutral in the fiscal year 2018.

Quick facts: Ocado Group PLC

Price: 2229 GBX

LSE:OCDO
Market: LSE
Market Cap: £16.68 billion
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