Ocado Teams Up With Kroger: What The Analysts Said

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Ocado, the online supermarket chain turned technology company, has signed a major deal with United States supermarket chain Kroger that could see Ocado technology powering as many as 23 Kroger fulfilment warehouses across the US. The Kroger partnership represents the fourth agreement Ocado has made during the past six months, although this represents its first foray into the USA market.

Kroger, who posted revenues of $122bn a year ago, will utilise Ocado's technology to automate and process the packing of grocery orders, using smart warehouses and robots in advanced fulfilment centres.

On the automation front, Ocado runs giant warehouses filled with smart robots that scurry around, carrying food.

Here's a video of Ocado's latest customer fulfilment center, in Andover in the U.K. This isn't your traditional warehouse.

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The new agreement is also one of a series of partnerships that Ocado has made with retailers around the world in order to share its innovative technology. "Ocado's current logistics and technical expertise in supporting online grocery fulfillment in Europe allows Kroger to potentially leapfrog both Walmart and Amazon in this space".

Several analysts have said that for investors that look at the long term, KR shares look interesting at their current price. Then came Canada's Sobeys in January, again boosting Ocado's shares by 28%.

The shares, which have more than tripled in value over the previous year, were changing hands for 925p each, up 68% on the day.

The new relationship is not expected to affect Kroger's earnings per diluted share guidance range for 2018 and 2019 as it is already reflected in the company's "Restock Kroger" plan.

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Kroger will take an additional 5% stake in Ocado, bringing its total investment to more than 6%. A spokeswoman for the company declined to specify which retailers Ocado had been talking to.

It's clear that Ocado is quite a catch for Kroger.

Tim Steiner, CEO of Hatfield, England-based Ocado Group, noted that the alliance provides the opportunity to revamp the grocery shopping experience for Kroger's customers as well as the way USA consumers buy groceries. "Our partnership with Ocado will speed up our efforts to redefine the food and grocery customer experience - creating value for customers and shareholders alike".

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