Ocado boosted by fresh details for US partnership

Shares in Ocado jumped as the online grocer unveiled details of its deal with US retailer Kroger, several months after it was announced.

Ocado confirmed it will construct 20 warehouses kitted out with its robotic technology over the next three years, as part of an exclusive deal with Kroger first revealed in May.

New York-listed Kroger has about 2,800 retail food stores under a variety of brands and serves nine million customers a day.

The first three sites, known as Customer Fulfilment Centres (CFCs), will be ordered by the end of 2018.

Shares in Ocado rose as much as 8% in morning trading on Tuesday.

The signing of the agreement was welcomed by investors, after Ocado’s share price declined in the months since the Kroger relationship was announced.

“The contract completion removes a (small) worry that started to build over the stock,” said Bruno Monteyne, senior analyst for European Food Retail at Bernstein.

“Given the pullback in the share price in recent months, without a change to the foreseeable economics and returns of the Ocado platform, we think this release is a timely reminder of the investment opportunity.”

Ocado also said it was exploring options with Kroger which could help it reduce how much it spends per CFC.

The cost to the company of the first three CFCs is expected to be about £90 million, which Ocado said it has sufficient funds to cover.

The move follows a string of international partnerships struck by Ocado including in Scandinavia with Swedish supermarket group ICA, in France with supermarket giant Groupe Casino and another in Canada with Sobeys.

Alex Tosolini, Kroger’s senior vice president of business development, said: “This is a significant step toward both solidifying our partnership with Ocado and redefining the Kroger customer experience.

“The alliance will bring to the US Ocado’s unparalleled innovation and technologies.”