Kroger, Ocado to Open Sixth Fulfillment Center in Wisconsin

Zacks Equity Research

The Kroger Co. KR and Ocado are set to open the sixth Customer Fulfillment Center (“CFC”). Both companies zeroed in on Pleasant Prairie, WI, as the location for the same.

Kroger will be able to leverage Ocado’s proven advanced technology to deliver groceries at a low cost. The automated warehouse will serve customers in Wisconsin, northern Illinois and Northwest Indiana.

The CFC will facilitate faster delivery of fresh food and thus enhance customers’ shopping experience, especially for those residing in Wisconsin. Further, the center will create around 400 job opportunities in Chicago, Milwaukee and nearby areas.

Kroger, which shares space with Walmart WMT and Target TGT, partnered with Ocado to reinforce its position in the online ordering, automated fulfillment and home delivery space. Keeping in these lines, the company built its first CFC in Monroe, OH, in June. Post this, it went on to announce additional locations in Florida, Georgia, Texas and the Mid-Atlantic region. Per sources, the company intends to open 20 warehouses across the United States.

Moving on, experts believe that the move is part of Kroger’s efforts to bring convenient grocery delivery options to customers. Moreover, it is aggressively working to ramp up its omni-channel capabilities in the wake of Amazon’s AMZN buyout of Whole Foods in 2017.

Per Kroger’s CEO Rodney McMullen, customers can now purchase "anything, anytime, anywhere.”

The grocery industry has been undergoing a fundamental change, with technology playing a major role and the focus shifting to online shopping. Kroger has taken stock of the situation and is in the process of undergoing a complete makeover. The company is expanding store base, and introducing items, digital coupons and the order online, pick up in store initiative.

Notably, its digital sales grew 31% in the second quarter of fiscal 2019. Also, pickup or delivery reached 95% of Kroger households (expanded to 1,780 pickup and 2,225 delivery locations). Management is also targeting “margin-rich alternative profit streams”, which are likely to contribute an incremental $100 million in operating profit this fiscal year versus the prior year.

All said, such well chalked out endeavors are expected to help this Zacks Rank #3 (Hold) company to boost growth. Notably, shares of Kroger have gained 18.7% in the past three months, outperforming the industry’s growth of 7.2%. You can see the complete list of today’s Zacks #1 Rank stocks here.



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