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Kroger CEO reveals how Ocado sheds are performing (Courtesy of the Jacksonville Business Journal) — Kroger Co.’s new Ocado automated customer fulfillment centers are performing better than the company expected less than two months after it opened the first two massive facilities.

That was one of the key points Rodney McMullen, CEO of Cincinnati-based supermarket giant Kroger Co. (NYSE: KR), made Thursday during a conference call with analysts and investors. McMullen was discussing Kroger’s third-quarter results that beat analysts’ estimates.

Kroger launched a $35 million, 335,000-square-foot automated warehouse and distribution center using technology from British online grocery delivery company Ocado in Monroe, about 30 miles north of Kroger’s headquarters, in March. It opened a second, similar facility in Groveland, Florida, just outside of Orlando, in April.

“We continue to be pleased with the rollout of (those) customer fulfillment centers, which are exceeding internal expectations,” McMullen said.

He referred to the company’s customer ratings, known as net promoter scores, as “outstanding.” “Our teams (are) delivering a world-class experience for our customers.”

Repeat customer usage is higher than Kroger expected too, McMullen said.

The Ocado facilities, which Kroger calls “sheds,” are aimed at providing products for customers who order online, either to be delivered to their homes or to be made available for them to pick up at stores. The automated facilities are designed to make fulfilling those orders faster, more accurate and ultimately less expensive than if humans selected those orders at stores.

Customers are placing increasingly larger orders that are fulfilled at Ocado facilities, McMullen said. Their placing more of their shopping dollars with Kroger as a result.

“What we expected is as the customers begin to trust the experience, begin to have good experiences, we geta higher share of their total spend, and that’s what we’re starting to see,” McMullen said.

The facility in Monroe largely serves Greater Cincinnati, Dayton and Indiana. Kroger, the nation’s largest operator of traditional supermarkets, continues to tie that facility more closely to its stores in the region, including 73 in Greater Cincinnati.

“It’s something that literally every single week that goes by, we further integrate to really make it a seamless experience for the customer,” McMullen said.

The situation is different for Kroger in Florida, where it doesn’t have any stores except one in the far northeastern corner of the state. It’s using the Ocado facility and two “spoke” facilities in the Tampa and Jacksonville regions to serve much of the central portion of the state. And Kroger has announced the opening of two Ocado facilities in South Florida to cover that portion of the state.

“We feel good about the opportunity in Florida,” McMullen said. “The population growth and economic growth in Florida is just mind boggling relative to an awful lot of the country. So it’s an incredible opportunity for all grocery retailers in Florida. The offering we have is unique in the market and very proud of what we’re getting done there. I think the growth in the market is so strong that I think all boats are rising in Florida.”