Kroger's automation deal sends Ocado shares up 50%


According to Ocado, the partnership aims to allow Kroger to "redefine the grocery customer experience" in the United States by establishing a centralised, automated model of online retailing.

Shares in Ocado shot up by more than 50% to a record high in London after the deal was announced Thursday.

Ocado' s biggest deal to date, is the latest in a series of tie-ups by the online retailer.

Some 9.5 per cent of Ocado's shares have been lent to hedge funds making bets against the firm, according to IHS Markit.

Agreement with Kroger seems very well developed, even though it hasn't been fully concluded.

The deal should help Kroger compete with Amazon, which has entered the grocery delivery market in a big way.

Kroger's automation deal sends Ocado shares up 50%

That figure could rise to 20 during the first three years of the partnership, it added.

As part of the agreement, Kroger will be the British firm's exclusive partner in the USA and will pay undisclosed monthly exclusivity and consultancy fee to the company.

Thursday's announcement is a "more major positive" than previous deals, because Kroger is one of the largest food retailers in the world and the agreement for multiple customer fulfillment centers seems to be under favorable terms.

With a net short position of one per cent, according to regulatory filings, Marshall Wace booked a paper loss of around £15m within minutes after Ocado shares rose 40 per cent this morning.

Kroger, the largest USA supermarket chain by revenue, operates about 2,780 supermarkets in the US and has some 443,000 employees. Goldman values each 1 billion-pound customer fulfillment center that Ocado agrees to supply at 26 pence a share, meaning that 20 customer fulfillment centers from Kroger would be equivalent to 182 pence a share.

Ocado chief executive Tim Steiner said working with Kroger to transform the way in which U.S. customers bought groceries represented "a huge opportunity to redefine the grocery experience" for Kroger customers. Kroger buying new shares in Ocado will also dilute earnings.