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Category: Kroger (KR) and Ocado
Date: 14 June 2020 Kroger stock price: $32.26 We take a look at the announcement by Kroger Co regarding 3 new high tech customer fulfillment centres it is planning on opening in partnership with Ocado
Kroger is incredibly excited to construct three additional industry-leading Customer Fulfillment Centers across the country in relationship with Ocado to bring fresh food to our customers more conveniently than ever before " |
About Kroger Co
The Kroger Co. was founded in 1883 and incorporated in 1902. As of February 1, 2020, Kroger is one of the world’s largest retailers, as measured by revenue, operating 2,757 supermarkets under a variety of local banner names in 35 states and the District of Columbia. Of these stores, 2,270 have pharmacies and 1,567 have fuel centers. We offer Pickup (also referred to as ClickList®) and Harris Teeter ExpressLane™ — personalized, order online, pick up at the store services — at 1,989 of our supermarkets and provide home delivery service to 97% of Kroger households. We also operate an online retailer. We operate 35 food production plants, primarily bakeries and dairies, which supply approximately 31% of Our Brands units and 42% of the grocery category Our Brands units sold in our supermarkets; the remaining Our Brands items are produced to our strict specifications by outside manufacturers. Our revenues are predominately earned and cash is generated as consumer products are sold to customers in our stores, fuel centers and via our online platforms. We earn income predominately by selling products at price levels that produce revenues in excess of the costs we incur to make these products available to our customers. Such costs include procurement and distribution costs, facility occupancy and operational costs, and overhead expenses. Our retail operations, which represent 97% of our consolidated sales, is our only reportable segment.
About Ocado Solutions
Ocado Solutions is responsible for Ocado's corporate partnerships, providing the Ocado Smart Platform (OSP) as a service to retailers around the world. OSP comprises access to Ocado's physical infrastructure solutions, running highly efficient warehouse operations for the single pick of products, together with the entire end-to-end proprietary software applications required to operate a world class online grocery business. It is underpinned by Ocado's proven expertise and experience as a dedicated online grocer in the UK.
Press release by Kroger announcing partnership between Kroger and Ocado
CINCINNATI, June 5, 2020 /PRNewswire/ -- The Kroger Family of Companies (NYSE: KR), America's largest grocery retailer, and Ocado (LSE: OCDO), a world leader in technology for grocery ecommerce, today announced the continued expansion of their partnership with plans to construct three new Customer Fulfillment Centers (CFC) in the Great Lakes, Pacific Northwest and West regions.
"Kroger is incredibly excited to construct three additional industry-leading Customer Fulfillment Centers across the country in relationship with Ocado to bring fresh food to our customers more conveniently than ever before," said Robert Clark, Kroger's senior vice president of supply chain, manufacturing and sourcing. "Through our strategic partnership, we are engineering a model for these regions, leveraging advanced robotics technology and creative solutions to redefine the customer experience."
Kroger has partnered with Ocado to accelerate its ability to provide customers with anything, anytime, anywhere. The CFC model – incorporating state-of-the-art automation and AI – will be used to expand Kroger products to a larger footprint. The new facility in the West will measure 300,000 square feet, the new facility in the Pacific Northwest will measure 200,000 square feet, and the facility in the Great Lakes region will measure 150,000 square feet. The varying sizes demonstrate the flexibility of the Ocado fulfillment ecosystem to best serve the respective markets. When operational, the facilities will collectively create more than 1,000 new jobs, with the potential for hundreds of additional career opportunities. The exact locations of the new facilities will soon be announced.
"Kroger and Ocado are building an ecommerce ecosystem across the U.S. that will deliver unrivalled online experiences to more customers, in more ways and in more markets," said Luke Jensen, CEO of Ocado Solutions. "Spanning a range of automated CFC sizes, these three new sites will be key parts of this growing and flexible fulfillment network. Alongside the scale and wider benefits of larger CFCs, smaller format and mini CFCs will allow Kroger to reach more geographies with Ocado's automation, while also catering to a wide range of options for delivery." The newly named locations will complement the retailer's previously announced CFC sites in Monroe, OH; Groveland, FL; Fredericksburg, MD; Atlanta, GA; Dallas, TX; and Pleasant Prairie, WI.Kroger plans to open the country's first CFC in Monroe, OH, a suburb of Cincinnati, in early 2021.
"Kroger is incredibly excited to construct three additional industry-leading Customer Fulfillment Centers across the country in relationship with Ocado to bring fresh food to our customers more conveniently than ever before," said Robert Clark, Kroger's senior vice president of supply chain, manufacturing and sourcing. "Through our strategic partnership, we are engineering a model for these regions, leveraging advanced robotics technology and creative solutions to redefine the customer experience."
Kroger has partnered with Ocado to accelerate its ability to provide customers with anything, anytime, anywhere. The CFC model – incorporating state-of-the-art automation and AI – will be used to expand Kroger products to a larger footprint. The new facility in the West will measure 300,000 square feet, the new facility in the Pacific Northwest will measure 200,000 square feet, and the facility in the Great Lakes region will measure 150,000 square feet. The varying sizes demonstrate the flexibility of the Ocado fulfillment ecosystem to best serve the respective markets. When operational, the facilities will collectively create more than 1,000 new jobs, with the potential for hundreds of additional career opportunities. The exact locations of the new facilities will soon be announced.
"Kroger and Ocado are building an ecommerce ecosystem across the U.S. that will deliver unrivalled online experiences to more customers, in more ways and in more markets," said Luke Jensen, CEO of Ocado Solutions. "Spanning a range of automated CFC sizes, these three new sites will be key parts of this growing and flexible fulfillment network. Alongside the scale and wider benefits of larger CFCs, smaller format and mini CFCs will allow Kroger to reach more geographies with Ocado's automation, while also catering to a wide range of options for delivery." The newly named locations will complement the retailer's previously announced CFC sites in Monroe, OH; Groveland, FL; Fredericksburg, MD; Atlanta, GA; Dallas, TX; and Pleasant Prairie, WI.Kroger plans to open the country's first CFC in Monroe, OH, a suburb of Cincinnati, in early 2021.
Our last stock valuation of Kroger Co
So what are The Kroger Company stock worth considering their latest earnings release? Based on the earnings released and the outlook provided our valuation models set a target (full value) price for The Kroger Company of $36.10 a stock (down slightly from our 3rd quarter 2019 earnings report valuation of Kroger) . We therefore believe Kroger Company stock is undervalued.
We usually recommend that long term fundamental or value investors look to enter a stock at least 10% below our target price which in this case is $36.10. a good entry point into the stock of Kroger Company would therefore be at $ 32.50 or below.
We expect that the stock of Kroger Company will kick upwards from its current price to levels closer to our target price/ full value price in coming weeks and months.
We usually recommend that long term fundamental or value investors look to enter a stock at least 10% below our target price which in this case is $36.10. a good entry point into the stock of Kroger Company would therefore be at $ 32.50 or below.
We expect that the stock of Kroger Company will kick upwards from its current price to levels closer to our target price/ full value price in coming weeks and months.
Next earnings release of Kroger Co
Kroger Co will release their 1st quarter 2020 earnings on 18 June 2020