Ocado strikes deal with US retailer Kroger to build robotic warehouse

Ocado’s key technology business has received another boost after US retailer Kroger placed a “wide-ranging” order to automate processes in its warehouses.

The FTSE 250 company’s technology solutions business, which provides third-party retailers with robotic technology for order fulfilment, has been under scrutiny amid delays in its rollout and disappointment with its growth rate.

Improved growth guidance released last week helped revive Ocado shares after a significant fall, with boss Tim Steiner urging investors to keep faith with the company’s strategy.

Ocado told shareholders on Monday that Kroger will deploy its “Re:imagined” technology in “multiple” fulfillment centers, as well as “future” ones.

“The technologies include Ocado’s proprietary innovations such as On-Grid Robotic Pick and Automated Frameload, which will bring new levels of efficiency and labor productivity to Kroger’s delivery network,” Ocado said.

‘These innovations will enable Kroger to further reduce CFC’s cost to serve and enhance an already market-leading customer proposition.’

CEO Steiner added, “Today marks another exciting milestone in our partnership with Kroger. Our current CFCs are already helping to deliver innovative service quality to their customers across the United States.

“We are excited about these latest technologies that will further enhance that proposition as well as the efficiency of Kroger’s operations in live and future CFCs.”

Ocado shares rose 7.3 per cent to 405.8 pence and hit the top of the FTSE 250 index on Monday morning.

But Ocado shares are down around 85 per cent from their lockdown-fuelled peak of 2,817p in September 2020, amid concerns over its joint venture with Marks & Spencer and delays in the rollout of its robotic warehouse technology.

The fortunes of Ocado, which is among the most shorted stocks in the UK market, have caused a split in sentiment in the City.

Ocado recently lost the support of Bernstein brokers, who had been seen as the “last bull” in the group’s shares.

The investment bank has slammed the performance of Ocado, which promises to be “jam tomorrow”, as it cut its rating from “outperform” to “underperform” and reduced its target price from 1,000p to 260p.

But Morningstar analysts believe Ocado could be worth almost three times its current value as it believes markets are underestimating the potential of its technology and growth in the online grocery market.

Steiner said on Monday: “We are delivering a step change in warehouse automation and new levels of efficiency to our partners as global supply chains are under significant pressure to manage higher volumes and increased complexity, as well as challenges in cost and availability of labor.”