Ocado shares tumble after Kroger signals review of robotic fulfilment centres

Ocado Group Plc shares plunged after Kroger, the supermarket chain that is Ocado’s strategic US partner, told investors it is reassessing the performance of automated customer fulfilment centres (CFCs) it operates with the British technology provider.

Kroger said on an earnings call that it is "taking a hard look" at its existing automated sites and will conduct a site-by-site analysis, noting that CFCs in high-density areas are performing well while those in lower-density regions show weaker customer uptake. The retailer said it is evaluating all options across its facilities as it seeks to boost profitability and reduce costs — comments that investors treated as negative for Ocado’s technology business.

Shares in Ocado fell 11.3% in early trading to 266 pence, leaving them down about 15.8% year to date. The drop reflected investor concern about the pace of roll‑out for Ocado’s technology and the strength of its partnership pipeline after Kroger said the expansion of automated sites in the US has been slower than initially expected.

Ocado, which operates an online supermarket in Britain through a joint venture with Marks & Spencer, derives a substantial portion of its market value from selling warehouse automation technology and know‑how to retailers around the world. The Kroger alliance, established in 2018, envisaged as many as 20 robotic CFCs across the United States. To date, eight such centres are operational and two additional sites are under construction in North Carolina and Arizona.

Analysts noted the remarks from Kroger could signal a shift in its fulfilment strategy. Neil Wilson, UK investor strategist at Saxo Markets, said the comments were "clearly a negative for Ocado" and suggested Kroger might move away from large automated CFCs in favour of using local stores to fulfil online orders in some markets.

Market unease has built over the past year amid concerns about the rate at which new technology sites have opened for grocery retail partners and the absence of fresh technology licensing deals. Ocado has invested heavily in research and development and in the scaled deployment of its robotics and software platform, making future orders and rollouts critical for the company’s revenue growth prospects.

Kroger’s comments came as the retailer outlined broader measures to lift profitability. It said that while some automated fulfilment centres are meeting expectations, others are not delivering the anticipated customer penetration, prompting a reassessment of capital and operating deployment.

Ocado and Kroger did not provide a timetable for any specific site closures or alterations to their long‑term commercial arrangements in public statements tied to the earnings call. Ocado has previously said the commercial model for its technology is dependent on tailored solutions for different markets and density profiles, and that performance varies by location.

Investors and industry observers will be watching further detail from Kroger’s site reviews and any consequential changes to orders or expansion plans, which could affect Ocado’s near‑term revenue outlook and the valuation investors place on its technology business. Ocado’s wider retail operations in the UK remain separate from its international technology contracts, but the company’s stock performance is sensitive to expectations about future technology deployments and partner commitments.