Ocado partnering with Kroger

Kroger Chairman and CEO Rodney Mc Mullen discussed Walmart as a competitor on Bloomberg Television on April 30

'The objective of this partnership is to allow Kroger to redefine the grocery customer experience in the United States through the adoption of the centralised, automated model of online retailing provided by the Ocado Smart Platform, ' Ocado said in a statement.

Ocado, which already works with Sweden's ICA, Canada's Sobeys and France's Casino (as well as Morrisons in its home market), said it had agreed a contract that could see Kroger open up to 20 automated warehouses in the U.S. over the next three years.

Ocado said it believed Kroger, which had sales of $122 billion (90 billion pounds) in its last fiscal year, was the grocer best-positioned to succeed in the US sector.

November's announcement of a deal with France's Groupe Casino (CASP.PA) set the shares on their way, and was followed by a tie-up with Canada's Sobeys and Sweden's ICA Group (ICAA.ST).

Tatton-Brown said the detailed financial terms still had to be agreed, but the deal was expected to be neutral in respect to earnings in the full-year 2018.

Ocado's stock market surge pushed the value of the company above £5 billion ($6.8 billion) on Thursday.

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Edinburgh Worldwide is the top-performing global smaller companies investment trust over the last three years, with the shares up 86%, while the Global Discovery fund has returned 55% over three years to the end of April, placing it third in its Citywire sector.

Ocado shares were trading nearly 80% higher on Thursday afternoon - reaching £10 per share at one stage. Ocado also works in partnership with Morrisons in the UK. 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. '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'.

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

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

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.

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