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Ocado shares soar as it partners Kroger to enter the U.S.

Stock MarketsMay 17, 2018 04:09AM ET
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© Reuters. FILE PHOTO: A worker loads a grocery order into baskets at a "Pick Station" at the Ocado CFC (Customer Fulfilment Centre) in Andover

By Paul Sandle

LONDON (Reuters) - Britain's Ocado (L:OCDO) said U.S. retailer Kroger (N:KR) had agreed an exclusive deal to use its technology for grocery deliveries, securing the online supermarket pioneer's entry into the world's biggest market and sending its shares up 50 percent.

The agreement, Kroger's response to Amazon's (O:AMZN) purchase of Whole Foods, takes Ocado's home-delivery platform into the United States for the first time and marks the fourth major deal it has signed with supermarkets in six months.

Ocado said it believed Kroger, which had sales of $122 billion in its last fiscal year, was the grocer best-positioned to succeed in the U.S. sector. It will now discontinue discussions with other US-based retailers.

Shares in the group, which listed in 2010, jumped over 50 percent in early Thursday to trade at a record high.

"We think this is just about as positive a deal as could have been expected to have been announced by Ocado," analysts at Barclays (LON:BARC) said. "The company now has an extremely credible partner in the largest grocery market in the world."

Ocado's technology automates the processing and packing of online grocery orders, using hundreds of robots in technological advanced order fulfillment centers.

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

As part of the deal, Kroger will take a stake in the British company, equivalent to 5 percent of the existing share capital valued at 183 million pounds, Ocado said.

Ocado said it expected the earnings impact of the deal to be neutral in full-year 2018.

Ocado shares soar as it partners Kroger to enter the U.S.
 

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