Ocado and Kroger to build online network

Ocado and Kroger to build online network

Ocado and Kroger to build online network

USA retailer Kroger has signed a landmark deal with Ocado to use its technology for grocery deliveries, marking the British online grocer's first entry into the United States.

Neil Wilson, senior markets analyst at Markets.com, said: "Ocado has some protection in the deal as if they fail to hit the capacity target, Kroger will pay compensation".

Rodney McMullen, chairman and chief executive of Kroger, said: "We see Ocado as an innovative, exciting and transformative partnership in pursuit of our Restock Kroger vision, to serve America through food inspiration and uplift".

Kroger and Ocado are working to identify the first three sites in 2018 for development of new, automated warehouse facilities in the US, and will identify up to a total of 20 over the first three years of the agreement.

While Ocado's share surge today burnt hedge funds, short selling volumes stand at one-year lows - more than 20 per cent of the firm's stock was on loan around this time last year.

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Ocado expects the earnings impact from the Kroger deal to be neutral in fiscal year 2018. Ocado now has "an extremely credible partner" in the world's biggest grocery market and the pact is an "unmitigated positive".

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

"Applications of [artificial intelligence] and machine learning pervade this platform", he said, noting the system helps predict changes in customer demand for its 50,000 items.

The company claimed the value of the Kroger partnership was worth more than the others in France, Canada and Sweden combined. Goldman values each 1 billion-pound customer fulfillment center that Ocado agrees to supply at 26 pence a share, meaning that 20 customer fulfillment centers from Kroger would be equivalent to 182 pence a share. "The market reaction was exceptionally bullish with shares jumping by 40% in early trade on the announcement".

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