Ocado shares jump 44% on tie-up with big U.S. grocer

Small cap stars buoyed by Ocado's surge on US deal

Ocado Group PLC, which runs online delivery services and makes related software, said Thursday it's signed a partnership agreement with supermarket chain The Kroger Co.

Kroger Co. has signed an agreement with UK-based Ocado Group Plc to bring that grocer's platform of home delivery into the US, the two companies jointly announced on Thursday. Within the terms of the agreement, Kroger will also acquire a 5 percent stake in Ocado.

Shares in Ocado are up by more than 250% over the last six months, as the company has finally delivered on expectations of an worldwide expansion.

Ocado's technology automates the processing and packing of online grocery orders, using hundreds of robots in technologically advanced order fulfillment centers. Ocado's home-delivery technology has already won three major deals with supermarkets around the world in the past six months.

"We are actively creating a seamless digital experience for our customers", said Kroger CEO Rodney McMullen in a press release. "Our partnership with Ocado will speed up our efforts to 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.

Tesla vehicle in Autopilot mode crashes into fire truck in Utah
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The shares jumped 62% to 894.6p on news of the tie-up with the largest supermarket chain in the US, Ocado's fourth worldwide deal with a supermarket in the last six months.

Ocado's chief executive, Tim Steiner, described the deal as "transformative" and said it would "reshape the food retailing industry in the U.S. in the years to come".

Will this partnership give Kroger the competitive ground it needs to take on the likes of Amazon, Walmart, and beyond?

Ocado has always been considered a weak link in the supermarket sector by some analysts who brand it grossly overvalued. "Not only does the knowledge make Kroger better positioned to succeed in e-commerce, but Ocado has also illustrated the ability to operate profitably in the e-commerce space, something yet to be realized in the US across any major grocery retailer". It has struck partnerships with Groupe Casino in France, Sobeys in Canada, and ICA Group in Sweden.

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