30th Oct 2018 08:17
LONDON (Alliance News) - FTSE 100-listed online grocer Ocado Group PLC said on Tuesday it has signed service and operational terms with US supermarket group The Kroger Co.
Following the announcement of the partnership in May, Kroger will order 20 Customer Fulfilment Centres over the first three years of the agreement, with three centre to be ordered before the end of 2018.
Ocado for its part will install and maintain the mechanical handling equipment needed in the centre to maintain an agreed level of throughput.
Customer Fulfilment Centres are automated distribution depots, where products can be stored and dispatched using automated mechanical systems.
Ocado said it expects the earnings impact of the agreement to be neutral in its current financial year. Ocado will finance Kroger's customer fulfillment centres in a similar basis to previous deals, up to the point when the final funding structure has been finalised. This is not expected to involve more than the first three centres.
The expected peak cumulative net outflow for Ocado of these initial three centres is GBP90 million. The grocer said it has more than sufficient funds to cover this with over GBP500 million of financing headroom.
"We are delighted to have signed this services agreement with Kroger which sets out the key parameters for our working relationship going forward. The Kroger and Ocado teams have been working hard for some time to prepare for the opening of the first CFCs in the United States. We are very excited at the prospect of helping Kroger bring new services and value to its customers and transform the food retail market in the US," said Luke Jensen, chief executive officer of Ocado Solutions.
Shares in Ocado Group were up 4.9% at 840.20 pence on Tuesday.
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