Kroger inks Ocado grocery delivery deal to battle Amazon threat

Kroger inks Ocado grocery delivery deal to battle Amazon threat

Kroger paying $247M to license Ocado online home-delivery technology

Kroger Co.is investing in a British online grocer as the U.S.'s largest supermarket chain seeks to compete with Amazon.com Inc.'s expanding food-retail operation and Walmart Inc.'s digital deals.

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

Shares in Ocado surged by nearly 81 per cent at one point yesterday to a record 997p, its biggest one-day rise, as investors cheered the tie-up with Kroger to identify sites for up to 20 automated warehouses across the U.S. over the first three years of the deal.

Kroger is one of the largest supermarket chains in the USA, with sales reaching $122 billion in 2017.

Chief executive Tim Steiner, said: "Ocado's unique, proprietary and industry-leading technology is set to transform the shopping experience of consumers around the world".

Perhaps the string of tie-ups with big worldwide retail players and yesterday's blockbuster response will force Ocado's critics to acknowledge the online grocer's potential.

Jefferies analyst James Grzinic, who rates the shares a "hold" said those terms represented "the strongest endorsement that Ocado could have delivered to investors". Over the first three years of the agreement they are to identify a further 20 sites.

Since 2014, Ocado has been exploring selling its technology and logistics expertise in a service model with an external retailer, and in recent months it has landed partnerships with Sobeys and Casino, Sheehan noted.

As part of the partnership with Ocado, the group will adopt the Ocado Smart Platform. Kroger will also take a 5% stake in Ocado.

Ocado's share price rocketed by 44% after the deal was announced.

Shares of Kroger, based in Cincinnati, rose almost 3 percent in premarket trading.

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.

The retailer's efforts to create a "seamless digital experience" for customers would speed up as a result, he added. Ocado has no chain of stores and does all home deliveries from its warehouses.

"It could also lose exclusivity rights, so (it) appears Ocado has given itself some options should this not go as well as planned".

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