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Ocado: Another Deal to Squeeze Bears

18 May, 2018, 03:26 | Author: Lawrence Cooper
  • Ocado and Kroger to build online network

The e-commerce grocery battle has a got a new turn with the interesting announcement of strategic alliance between U.S. supermarket giant, Kroger and United Kingdom grocery e-commerce pure play, Ocado. "We will be preparing the business for a transformative relationship which will reshape the food retailing industry in the U.S.in the years to come". As part of the deal, Kroger will be taking a stake in the British company which would be equivalent to 5 percent of the existing share capital valued at 183 million pounds.

Kroger and Ocado are looking for three sites to develop automated warehouses in the USA, with up to 20 such facilities planned in the next three years.

But what is Ocado (ocdgf), the company whose share price has popped by more than 60% as a result of the Kroger deal?

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.

The two companies are working to identify the first three sites in 2018.

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Ocado has broken off talks with other U.S. supermarket chains following the deal with Kroger, which operates nearly 2,800 stores across the USA under various brands.

"The scale of the deal could shake up the current US grocery e-Commerce market, offering a step-change in service levels, order accuracy and timeliness", said Roberts in an email sent to Retail TouchPoints.

Ocado Group CEO Tim Steiner said: "Ocado's unique, proprietary and industry-leading technology is set to transform the shopping experience of consumers around the world". Over the next three years, they will aim to find locations for 20 fulfilment warehouses.

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

About Ocado Solutions Ocado Solutions is responsible for corporate partnering, which began with its agreement to operate the online business of Wm Morrison Supermarkets plc in the United Kingdom, and more recently with agreements with Groupe Casino, Sobeys and ICA Group to develop their online businesses in France, Canada and Sweden respectively. If the retailer fails to hit volume targets it could also lose exclusivity and will have to pay compensation to Ocado. It's another blow, however, for the 7.2% who remain resolutely bearish, some of whom are surely rushing for the exit (buying to cover their short positions), contributing to the share price jump.