Ocado signs partnership agreement with United States giant Kroger

Ocado signs partnership agreement with United States giant Kroger

Ocado signs partnership agreement with United States giant Kroger

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

Ocado is making a major push into the USA market after striking a deal to provide its technology in America to the grocery giant Kroger, the world's third largest retailer.

The deal with Kroger is arguably Ocado's biggest to date and demonstrates that the company's technology push is starting to gain traction after some five years or so of pushing it.

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

"The opportunity to partner with Kroger to transform the way in which United States 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".

Ocado said that it expects that the structure of the terms that it will agree with Kroger will be "broadly similar per CFC" to those agreed with its existing global partners: Groupe Casino, in France; Sobeys, in Canada; and ICA, in Sweden.

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"The short sellers were hoping Ocado wouldn't deliver on its worldwide expansion plans".

Evidently, this is great news for the bulls, who have waited several year for these valuable partnership deals to transform the company's prospects.

The Kroger deal will see the American grocery giant take a 5% stake in Ocado with an investment worth about £183 million ($247 million).

Even though Ocado remains the #13 most shorted stock, according to FCA disclosure rules, this is an improvement over its position in July 2016, when it was the most shorted stock with 21.37% of shares out on loan and 16% in November 2017, before the first deal came through and the company began proving the sceptics wrong. 'Moreover, some of the nuances of this deal in particular give us a feeling that the tables have turned and Ocado now has the supplier power'.

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

Jefferies analyst James Grzinic, who rates the shares a "hold" said those terms represented "the strongest endorsement that Ocado could have delivered to investors".

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