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Kroger partners with Ocado

Kroger partners with Ocado

Shares in Ocado (OCDO) have rocketed after the online supermarket signed a deal to become the exclusive partner of USA giant Kroger (KR.N).

The Kroger deal is "seismic" for Ocado, which has been looking to break into the USA for some time, according to Bryan Roberts, Global Insights Director at tcc global.

"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", said Rodney McMullen, Kroger's chairman and CEO.

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

Ocado has already partnered with Groupe Casino, Sobeys Inc. and ICA Group.

Ocado chief executive Tim Steiner said working with Kroger to transform the way in which USA customers bought groceries represented "a huge opportunity to redefine the grocery experience" for Kroger customers. It's another blow, however, for the 7.2% who remain resolutely bearish, some of whom are surely rushing for the exit (buying to cover their short positions), contributing to the share price jump.

Ocado is a top five holding in Douglas Brodie's £441 million Edinburgh Worldwide (EWI) investment trust and £394 million Baillie Gifford Global Discovery fund, representing 2.6% and 2.9% of the respective portfolios.

It also said that Kroger, which recorded sales of US$122bn during 2017, making it the largest grocery retail chain in the United States in terms of revenue, was best placed to retain that market-leading position. That deal popped Ocado's shares by as much as 28%.

However, the deal of Kroger has taken the idea of merging this to a whole new level.

Kroger Co (NYSE:KR) officially has a deal in place that's aimed at boosting its online grocery offerings.

'We are sure that the deal announced today is a step change, ' he said. The Kroger partnership represents the fourth agreement Ocado has made during the past six months, although this represents its first foray into the US market.

Under the deal, Ocado and Kroger [which now partners with Instacart and offers click and collect from store services for online shoppers] will identify the three initial sites for automated "dark" warehouse facilities in the USA as part of a plan to build up to 20 sites over three years.

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