Ocado Stock Skyrockets on Huge Grocery Delivery Deal With Kroger

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Ocado has been ramping up its international ambitions with a new US tie-up

Kroger will become the exclusive user of Ocado's technology for distributing groceries and food, according to a statement Thursday.

Ocado - which has its own branded online grocery business in the UK - has partnered with other retailers in the UK (Waitrose and Morrisons), France (Casino) Sweden (ICA) and Canada (Sobeys).

As part of the partnership agreement, Kroger will increase its existing investment in Ocado by 5% in a subscription rights agreement.

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Kroger and Ocado are looking for three sites to develop automated warehouses in the US, with up to 20 such facilities planned in the next three years.

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.

The deal, Ocado's biggest to date, marks the latest in a series of tie-ups among grocers as online competition heats up and pricing pressure squeezes profit margins. Over the first three years of the agreement they are to identify a further 20 sites.

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Ocado was founded in 2000 by Tim Steiner and two other former Goldman Sachs bankers and is best known as an online grocery chain delivering premium products. We are almost half a million associates who serve nine million customers daily through a seamless digital shopping experience and 2,800 retail food stores under a variety of banner names, serving America through food inspiration and uplift, and creating #ZeroHungerZeroWaste communities by 2025.

Ocado started business in the United Kingdom around the turn of the millennium as an online grocery store-unusual at the time. It also said it planned to offer curbside pickup from roughly 1,600 stores this year.

The Kroger deal is the biggest yet, and Ocado's share price is at the time of writing up 64.2% on the news. Ocado recently undertook an ambitious activity to transform its warehouse automation. The average multiple for the United Kingdom grocery retail sector is 17. 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. More than 56 million Ocado shares were on loan on Tuesday, the most recent data from industry tracker FIS' Astec Analytics showed.

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