How Kroger Plans to Keep Up With Amazon

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Kroger Co. (NYSE: KR) shares made a handy gain early Thursday after the grocery chain announced that it would be partnering with the online supermarket Ocado. The goal of this exclusive partnership is to accelerate Kroger’s creation of a seamless shopping experience for America’s families.

This alliance will bring to the United States for the first time the Ocado’s Smart Platform, which includes online ordering, automated fulfillment and home delivery capabilities. In a sense, this is Kroger’s way of keeping up with the online delivery services that other major companies like Amazon are offering.

As part of the partnership agreement, Kroger will increase its existing investment in Ocado by 5% in a subscription rights agreement. This will bring the company’s total investment to more than 6%. Ocado will partner exclusively with Kroger in the United States, enhancing Kroger’s digital and robotics capabilities and helping expand its coverage area.

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. The duo will identify up to a total of 20 over the first three years of the agreement.

The new relationship is not expected to affect Kroger’s earnings per diluted share guidance range for 2018 or 2019.

Rodney McMullen, Kroger’s board chair and chief executive, commented:

We see Ocado as an innovative, exciting and transformative partnership in pursuit of our Restock Kroger vision, to serve America through food inspiration and uplift. We are actively creating a seamless digital experience for our customers. Our partnership with Ocado will speed up our efforts to redefine the food and grocery customer experience – creating value for customers and shareholders alike.

Shares of Kroger were last seen up more than 3% at $25.78, with a consensus analyst price target of $27.43 and a 52-week trading range of $19.69 to $31.45.

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