Ocado signs deal for robotic warehouse with US retailer Kroger
- Kroger to use Ocado technology in current and future warehouses
- Ocado’s technology solutions are under scrutiny
Ocado’s key technology arm has received a fresh boost after US retailer Kroger placed a “major” order to automate processes in its warehouses.
The FTSE 250 company’s technology solutions, which provides third-party retailers with robotic order processing technology, have been in the spotlight amid rollout delays and disappointment over growth figures.
Improved growth forecasts published last week have helped Ocado shares rebound after a steep decline, with CEO Tim Steiner urging investors to remain confident in the company’s strategy.
Robots: Automated picking machines at Ocado’s Luton distribution centre
Ocado told shareholders on Monday that Kroger will roll out its ‘Re:imagined’ technology across ‘multiple’ distribution centres, as well as ‘future’ distribution centres.
“The technologies include Ocado’s patented innovations, such as On-Grid Robotic Pick and Automated Frameload, which will take the Kroger Delivery network to new levels of efficiency and workforce productivity,” Ocado said.
“These innovations enable Kroger to further reduce the cost of using CFCs and enhance an already market-leading customer proposition.”
Chief Executive Steiner added: “Today marks another exciting milestone in our partnership with Kroger. Our current CFCs are already helping to deliver groundbreaking quality of service to their customers in the U.S.
“We are excited about the latest technologies that will further enhance this offering as well as the efficiency of Kroger’s operations in active and future CFCs.”
Ocado shares rose 7.3 percent to 405.8p on Monday morning, hitting the top of the FTSE 250 index.
However, Ocado shares have fallen around 85 per cent from their peak of 2,817p in September 2020, triggered by the lockdown, amid concerns over its joint venture with Marks & Spencer and delays to the rollout of warehouse robotics technology.
The situation at Ocado, one of the most shorted stocks on the UK market, has led to a split in sentiment in the British City.
Ocado recently lost the support of brokers at Bernstein in what was seen as the ‘final boom’ on the group’s shares.
The investment bank slammed Ocado’s ‘jam tomorrow’ performance, downgrading its rating to ‘underperform’ from ‘outperform’ and cutting its price target to 260p from 1,000p.
However, analysts at Morningstar believe Ocado could be worth almost three times its current value, as they say markets are underestimating the potential of Ocado’s technology and growth in the online grocery market.
Steiner said Monday: “We are delivering a step forward in warehouse automation and a new level of efficiency to our partners as global supply chains face increased pressure to handle higher volumes and greater complexity, as well as challenges around labor costs and availability.”
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