Kroger to team up with Ocado: plans for automated warehouses in UK

London Stock Exchange

GETTYThe FTSE closed on it highest ever level

Already, Kroger and Ocado are working to identify the first three sites in 2018 for development of new, automated warehouse facilities in the United States.

This is a big deal, said City broker Numis of Ocado PLC's (LON:OCDO) £183mln tie-up with USA retail giant Kroger Co (NYSE:KR) - though it's doubtful the investing public really needed to be told with the share price up nearly 70%.

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

The UK-based online grocer, which has achieved remarkable growth since its foundation in 2002, has teamed up with one of the world's biggest retailers to provide it with its unique technology solutions.

There are losers in the rapid ascent of the share price - the short sellers betting that Ocado would stumble and fall with the onslaught of the big beasts of online retail, led by Amazon.

Tim Steiner, CEO of Ocado, said the deal means that his company can bring its transformative retail technology to consumers worldwide.

FTSE soars on Ocado US deal news
GETTYFTSE soars on Ocado US deal news

Rodney McMullen, Kroger's chief executive, said the partnership would the grocer "redefine the food and grocery customer experience - creating value for customers and shareholders alike". Over the next three years, they will aim to find locations for 20 fulfilment warehouses.

"Instacart is still the best partner for home delivery if one doesn't have dedicated e-commerce" operations, said Burt Flickinger, managing director of consultancy Strategic Resource Group. Shares in Ocado were at 552 pence before the deal was announced. More than 56 million Ocado shares were on loan on Tuesday, the most recent data from industry tracker FIS' Astec Analytics showed.

Kroger shares ended the US Thursday trading session 1.44% higher at $26.30.

The deal is a setback for Ahold Delhaize, owner of US chains Food Lion, Stop & Shop and Giant, which some analysts had considered a candidate to merge with Kroger to give the retailer access to Ahold's USA online grocery delivery service Peapod.

The retailer's efforts to create a "seamless digital experience" for customers would speed up as a result, he added.

"It could also lose exclusivity rights, so (it) appears Ocado has given itself some options should this not go as well as planned".

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