Ocado Teams Up With Kroger: What The Analysts Said

The deal with Kroger takes Ocado's home-delivery platform into the US for the first time

The deal with Kroger takes Ocado's home-delivery platform into the US for the first time

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 will partner exclusively with Kroger in the USA, enhancing the Cincinnati-based grocer's digital and robotics capabilities and help expand its seamless coverage area.

Ocado said that it predicts the deal will have a neutral impact on its earnings this year.

The UK-based online grocer, which has achieved remarkable growth since its foundation in 2002, has teamed up with one of the world's biggest retailers to provide it with its unique technology solutions.

Ocado CEO Tim Steiner is confident that this deal, and others like it, will "transform the shopping experience of consumers around the world".

The deal is the latest in a series of tie-ups announced by Ocado recently. This is being done though a subscription rights agreement and brings its total investment in OCDGF to 6%.

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Rodney McMullen, Kroger's chief executive, said the partnership would the grocer "redefine the food and grocery customer experience - creating value for customers and shareholders alike".

The Kroger deal is definitely Ocado's biggest yet but certainly not its first. In the next three years, they will identify up to 20 warehouse sites. It has struck partnerships with Groupe Casino in France, Sobeys in Canada, and ICA Group in Sweden. Ocado Solutions CEO Luke Jensen is certainly intrigued by the opportunity at hand, noting that the "grocery online market in the USA has been relatively underdeveloped compared with some European markets".

Kroger operates almost 2,800 stores in 35 USA states and has a turnover of more than $115 billion (£85 bn).

It has even said it will pay compensation if it fails to hit the capacity targets the two retailers have agreed. Kroger will also take a 5 per cent stake in Ocado.

The surprise deal and jump in the share price caught out many hedge funds betting the next move would be down.

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

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