Ocado shares tumble after Kroger warns it is rethinking robotic warehouses

Ocado Group Plc shares fell sharply on Friday after US retail partner Kroger said it was "taking a hard look" at its automated customer fulfilment centres (CFCs), prompting investors to reassess the value of Ocado’s warehouse technology business.

Kroger, which has been Ocado’s strategic partner since 2018, told analysts it is carrying out a site-by-site analysis of its robotic fulfilment facilities, saying centres in densely populated areas perform well while those in lower-density regions have weaker customer uptake. The supermarket operator said it is evaluating options across its facilities to boost profitability, including potential closures.

The comments come against a backdrop of a slower-than-expected rollout of Ocado’s technology in the United States. Kroger and Ocado had planned to build 20 robotic CFCs across the US; eight are currently operational and two more are under development in North Carolina and Arizona. The slower pace of openings, and uncertainty over future sites, has fuelled investor anxiety.

Ocado’s stock fell about 11.3% in early trading to 266 pence, wiping out more than a tenth of the company’s value on the session and leaving the shares down roughly 15.8% since the start of the year. Analysts said Kroger’s remarks directly affect market perceptions of Ocado because a significant portion of the company’s valuation rests on its ability to sell and scale its automated warehouse technology to international retailers.

Neil Wilson, UK investment strategist at Saxo Markets, said the comments were ‘‘clearly a negative for Ocado,’’ adding that Kroger appears likely to favour smaller local fulfilment solutions that would rely more on existing stores rather than the large CFCs provided by Ocado.

Ocado operates an online supermarket in the UK through a joint venture with Marks & Spencer but has long promoted its proprietary warehouse automation systems as a technology export. The business model depends on securing additional third-party technology deals and accelerating openings of CFCs for existing partners. Over the past year, concerns about the pace of new openings and the scarcity of fresh technology agreements have weighed on the stock.

Kroger did not commit to specific closures on the call but said it was reviewing performance and economics at each site to improve profitability. The company has previously cited cost pressures and the need to increase returns from capital-intensive fulfilment centres as drivers for re-examining its network design.

Investors and industry watchers will be closely watching Kroger’s next steps and any commentary from other Ocado partners, as changes to the US rollout could have knock-on effects for Ocado’s prospects in other markets and for its licensing revenue. Ocado’s management has in recent years emphasised the dual nature of its business—retailing in Britain and technology licensing internationally—making partner decisions in key markets material to the firm’s outlook.

Trading in Ocado shares remained volatile through the session as market participants digested the potential implications for future technology deployments and revenue streams. Ocado declined to comment beyond previously published statements on its US partnership.

The situation highlights broader industry questions about how supermarkets balance large automated fulfilment hubs with more distributed, store-based fulfilment models as companies try to meet online grocery demand while containing costs.