Kroger paying $247M to license Ocado online home-delivery technology
May 17 2018 by Johnny Bowman
UK-based online grocery specialist Ocado has added to its recent list of high-profile partnerships with the news that it has signed a major collaboration agreement with U.S. group Kroger, the world's third-largest food retailer, to build new ecommerce infrastructure. Ocado will also allow Kroger to use its online shopping and logistics technology. It started distributing groceries for Waitrose and floated in 2010.
While Ocado's share surge today burnt hedge funds, short selling volumes stand at one-year lows - more than 20 per cent of the firm's stock was on loan around this time last year.
Ocado should be commended for its "significant potential deal" with Kroger, but Shore questions the materiality of the worldwide deals and when they will make a fundamental difference to both revenues and earnings.
The deal, which follows recent similar deals with Groupe Casino in France, Sobeys in Canada, ICA in Sweden and Morrisons in the United Kingdom, means Kroger can make exclusive use of Ocado's Smart Platform technology for what the British firm described as "grocery and other food distribution-related activities".
Ocado has signed a string of similar technology deals with major supermarkets in France, Canada and Sweden.
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"It could also lose exclusivity rights, so (it) appears Ocado has given itself some options should this not go as well as planned".
Tim Steiner, Ocado's chief executive, said the deal would be "transformational" and "reshape the food retailing industry in the USA in the years to come".
"Our success as a retailer shows that we can offer customers unrivalled choice, quality and convenience, efficiently and profitably".
Ocado was created in 2000 in the UK.
"Shares are priced for these deals to be coming thick and fast". The short sellers were hoping Ocado wouldn't deliver on its worldwide expansion plans, that position now looks like a badly busted flush. "The market reaction was exceptionally bullish with shares jumping by 40% in early trade on the announcement".