Ocado Group Signs Services Agreement with Kroger

By Maryam Cockar

Ocado Group PLC (OCDO.LN) said Tuesday that it has agreed service and operational terms with U.S. retailer Kroger Co. (KR) for a partnership between the two companies.

Under the agreement, which was first announced in May, Kroger will order 20 customer-fulfillment centers over the first three years of the deal, and the first three centers by the end of 2018. The deal will consist of up-front fees and ongoing capacity fees.

Ocado said it will install and maintain mechanical handling equipment for Kroger's customer-fulfillment centers, which are expected to go live within about two years of each order being placed.

Ocado said in order to expedite the opening of the centers in the U.S., the first centers ordered this year will have funding requirements similar to earlier deals.

Ocado expects the earnings impact of the deal to be neutral in fiscal 2018. Until the final funding structure has been finalized, Ocado will finance Kroger's centers on a similar basis to previous deals, the company said.

The expected peak net outflow for Ocado for the three centers is 90 million pounds ($115.4 million) and Ocado said with over GBP500 million of financing headroom, it is more than able to cover this.

Write to Maryam Cockar at [e-mail]

(END) Dow Jones Newswires

October 30, 2018 03:55 ET (07:55 GMT)

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