Ocado shares jump amid tie-up announcement with Canada's Sobeys

Ocado said it will partner exclusively with Sobeys in Canada

Ocado said it will partner exclusively with Sobeys in Canada

On grocery deliveries, Sobeys and Ocado will develop their first Customer Fulfilment Centre (CFC) in the Greater Toronto Area.

In addition to this initial CFC, Sobeys and Ocado will consider developing other CFCs in Canada's dense urban areas.

A similar deal with France's Groupe Casino was agreed in November past year.

The partnership will bring a new website for online grocery shopping plus mobile grocery ordering apps, while Ocado's latest automated warehouse geared towards e-commerce will be built in Toronto. "Sobeys is a highly successful and much admired Canadian business and we are proud that they have chosen Ocado Solutions to partner with to build their online grocery business".

The tie-up will involve Ocado helping launch Sobeys' online grocer service, and include investment by Ocado installing its grid and robots.

Sobeys operates more than 1,500 stores across Canada and recorded sales of C$23.8 billion past year.

In its first venture into North America, the online grocery retailer is set to establish a foothold in the country via a partnership with Sobeys, which has an estate of over 1500 stores across Canada.

The initial fees will be offset by the costs linked to establishing the partnership and integrating its software platform with Sobeys' systems, the United Kingdom company said.

It then expects capital expenditure of £15m in the 2018 financial year to support the development of its platform.

This means that Ocado expects to be earnings neutral for the year, but has stated that the deal will add "significant long-term value to the business".

Ocado confirmed last week that, in order to provide greater clarity on the split between Ocado Retail and Ocado Solutions, it will be introducing segmental reporting of sales and EBITDA from the publication of full year 2017 results.

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