Coles share price: Coles deal with Ocado sees shares rise 3%
Shares of Australian supermarket chain Coles, have risen to 3.1% on Tuesday, after announcing a deal with British online retailer Ocado
Coles signed the partnership with Ocado on Tuesday, which will see Ocado available to Coles’ Australian customers by 2023.
The agreement will allow Coles access to Ocado’s services for product distribution.
Coles' capital expenditure on this deal will likely be about A$130 million to A$150 million
The deal comes as online competition in the food-retail industry ramps up, putting added pressure on retailers.
Coles share price up 3.1 % upon the news
In response to the announcement, Coles' share price has risen to A$12.065, marking their biggest intraday percentage gain since January 14. Coles stocks also soared, hitting their highest since February 19.
Coles to use distribution centres through Ocado
Coles plan is to provide services to online customers by fulfilling orders through Ocado’s robotic distribution centres, with customers in less populated areas benefiting from Ocado’s store-pick software.
Two robotic distribution centres will be built in Sydney and Melbourne over four years to process the orders.
Coles will pay Ocado upfront fees upon signing and during the development phase. Ocado said it expected the deal to create significant long-term value to the business.
Ocado has 1% share of Britain's grocery market but has an 8.7 billion-pound ($11.5 billion) stock market value, largely driven by the technology side of its business.
It provides international retailers with the infrastructure and software to develop their own online grocery businesses to compete with online distributors.
Analysts say the agreement could be a good move for Coles, helping them to tackle online competition.
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