Markets

Ocado shares rise 47 per cent on back of Kroger deal

Ocado shares rise 47 per cent on back of Kroger deal

UK-based online grocery specialist Ocado has added to its recent list of high-profile partnerships with the news that it has signed a major collaboration agreement with USA group Kroger, the world's third-largest food retailer, to build new ecommerce infrastructure.

Ocado has signed an exclusive partnership with America's second-biggest supermarket chain - sending the United Kingdom online grocer's shares to record levels.

According to Ocado, the partnership aims to allow Kroger to "redefine the grocery customer experience" in the USA by establishing a centralised, automated model of online retailing. It started distributing groceries for Waitrose and floated in 2010.

That figure could rise to 20 during the first three years of the partnership, it added.

"Ocado believes Kroger to be the grocer best-positioned to win in USA grocery and will discontinue discussions with other US-based retailers", the companies said in a statement.

Tim Steiner, the chief executive and co-founder of Ocado, said: "The opportunity to partner with Kroger to transform the way in which U.S. customers buy grocery represents a huge opportunity to create value for the stakeholders of both Kroger and Ocado".

Ocado had kept investors waiting for years after setting out a strategy to grow faster by providing its technology to other supermarket chains overseas as well as being an online retailer in its own right. Kroger will also take a 5 per cent stake in Ocado.




"Our success as a retailer shows that we can offer customers unrivalled choice, quality and convenience, efficiently and profitably".

The opportunity to partner with Kroger to transform the way in which USA customers buy grocery represents a huge opportunity to redefine the grocery experience of Kroger's customers and create value for the stakeholders of both Kroger and Ocado.

Thursday's announcement is a "more major positive" than previous deals, because Kroger is one of the largest food retailers in the world and the agreement for multiple customer fulfillment centers seems to be under favorable terms.

"This is a sign that the momentum is very much behind Ocado in terms of its global expansion".

However, its share price is looking forward to future earnings based on licensing out its online delivery technology, rather than the revenues it's now making from food retail.

The news sent Ocado's shares up 31pc in early trade to 725p.


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