Kroger's deal with Ocado - coming less than a year after Amazon.com bought key Instacart partner Whole Foods - puts more pressure on the 5-year-old San Francisco company that picks and delivers groceries for dozens of other retailers, including Costco Wholesale Corp, Walmart Inc's Sam's Club, Albertsons and Sprouts Farmers Market Inc.
Shares in Ocado (OCDO) have rocketed after the online supermarket signed a deal to become the exclusive partner of United States giant Kroger (KR.N).
The deal is not expected to affect Kroger's EPS guidance for 2018 or 2019. 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.
He said Kroger, which had sales of $122 billion in its last fiscal year, was the grocer best-positioned to succeed in the US sector.
"Ocado's unique, proprietary and industry-leading technology is set to transform the shopping experience of consumers around the world", Ocado Group CEO Tim Steiner, said.
Ocado' s biggest deal to date, is the latest in a series of tie-ups by the online retailer. The deal - the British company's biggest yet, according to Bloomberg - will bring Ocado's robotic and digital capabilities to Kroger.More news: Antoine Griezmann to Barcelona: Atletico Madrid star coy on transfer speculation
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As part of the partnership with Ocado, the group will adopt the Ocado Smart Platform. Ocado Solutions is responsible for corporate partnering. The companies said they aim to identify up to 20 possible sites for the e-commerce facilities over the first three years of their pact. More than 56 million Ocado shares were on loan on Tuesday, the most recent data from industry tracker FIS' Astec Analytics showed.
The surprise deal and jump in the share price caught out many hedge funds betting the next move would be down.
"We see Ocado as an innovative, exciting and transformative partnership, said Kroger chairman and CEO Rodney McMullen".
Ocado shares were trading nearly 80% higher on Thursday afternoon - reaching £10 per share at one stage.
The retailer's efforts to create a "seamless digital experience" for customers would speed up as a result, he added.
"With such a deal, Kroger is now primed to meaningfully improve upon its current scale advantages and omnichannel offerings versus peers, as Ocado will boost its online ordering, automated fulfillment and home delivery capabilities", Jefferies analyst Christopher Mandeville said in a research note.